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The BulletinJuly 19, 2024

Calls for airfare inquiry: Are we in a cost of flying crisis?

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A war of words erupted yesterday between Consumer NZ and Air New Zealand, writes Stewart Sowman-Lund in this extract from The Bulletin. To receive The Bulletin in full each weekday, sign up here.

Crisis point

“Remember when domestic flights were $29,” I asked in this piece for The Spinoff back in 2022. It was a plea for help, reflecting on a time when you could travel around the country without it costing an arm and a leg. Back then, Air New Zealand was in the news for rising ticket prices that were, partly, a hangover from Covid-19. Now, in July 2024, the national airline’s once again being called out for the cost of flying. Consumer NZ ignited the criticism yesterday when it released figures alleging an up to 300% increase in the cost of air travel over the past five years, as Stuff’s Brianna McIlraith reported. “Catching a flight has become a luxury for most,” her story began. Consumer’s claim was centred on a comparison between 11 Air New Zealand flights in 2023 and 2024 and equivalent fares from 2019 and 2021, finding that all bar one were now more expensive. It prompted a fiery response from the airline, but also questions about a more substantive investigation into this new crisis.

How has Air New Zealand responded?

On RNZ’s Morning Report yesterday morning, Air New Zealand’s head of domestic Scott Carr strongly pushed back on Consumer’s claims calling them “quite misleading”. I recommend listening to the interview if you’re interested, because the write-off doesn’t fully capture how staunchly Carr rejected any suggestion the airline was overcharging passengers. In short, his argument was that 11 flights was an insufficient sample size and that “average fares across [the] domestic network are only up 22%” over the five year period. Air New Zealand hasn’t shied away from admitting that travel is more expensive in 2024 than pre-pandemic, with the NBR (paywalled) reporting earlier in the year that capacity issues, fuel prices and airport costs were to blame. None of this, however, does anything to address the concerns of customers. In what could be coincidental timing, Air New Zealand launched a domestic sale on Wednesday night which received a fair amount of media coverage, including a plug on Seven Sharp. Free marketing, yes, but also likely a symptom of just how pricey it now is to travel around the country.

Does the airline industry need an inquiry? 

As noted by BusinessDesk’s Pattrick Smellie in February, Air New Zealand holds an 86% market share of the domestic travel market, which is about as close to a monopoly as you can get – a point raised by Corin Dann in the RNZ interview yesterday morning. Comparisons can reasonably be made to sectors like banking and supermarkets, both under intense scrutiny over a lack of competition. While Air New Zealand claims transparency around its airfares, there’s nothing more transparent than throwing the doors open to an external investigation. This Newsroom report on the Commerce Commission’s draft report into the banking sector is a useful comparison, as it notes that while the banking sector claims there is an innocent explanation for high profits, the consumer watchdog suggested it may just boil down to a lack of competition. Just this week, reported the Herald, the Commerce Commission expressed concern over a proposed merger of Foodstuff’s North Island and South Island.

Consumer NZ is leading a renewed call for deeper scrutiny of airfares, arguing that recent market studies have revealed how limited competition could result in poor outcomes. It’s not the first time a call like this has been made, and Air New Zealand said in May it would be “happy to open the books”, the Herald’s Grant Bradley reported.

Auckland Airport also in the limelight 

Tangentially related, but it’s also been a big week for Auckland Airport. Air New Zealand has previously claimed airport costs have been one reason for a rise in airfares, and warned in February that the projected costs for the airport’s redevelopment would be “paid for by airlines through steadily increasing aeronautical charges, leading to unaffordable airfares for some Kiwis”. This week, as 1News reported, the Commerce Commission said that while some price increases were “necessary” to fund the investment, “the airport’s charges over the five-year period [from July 2022 to 2027] are in excess of what is reasonable”. Speaking to Newstalk ZB’s Mike Hosking, Air New Zealand boss Greg Foran said more regulatory change to constrain overspending was required and it was something the airline would be lobbying for. “Auckland Airport are doing what Auckland Airport would do, it’s the regulations that need to change and it’s [commerce minister] Andrew Bailey that can make that happen.”

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The BulletinJuly 18, 2024

The missing diary entry that’s still dogging Shane Jones

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The minister defended the omission as a ‘cock-up’, but not everyone is so convinced, explains Stewart Sowman-Lund in today’s extract from The Bulletin. To receive The Bulletin in full each weekday, sign up here.

A minister with many hats

Shane Jones is a busy man. The regional development minister, reported BusinessDesk, is about to head off on a 15-stop national tour to plug his $1.2bn regional infrastructure fund. As the de facto second-in-command of New Zealand First, he’s often in the media acting as the mouthpiece for Winston Peters while the foreign minister is out of the country, such as this week criticising independent MP Darleen Tana for refusing to leave parliament. Earlier in the month, as the NBR reported, he was in Australia wearing his resources minister hat and meeting with mining companies. In other words, his diary is as full as you’d expect from a senior government minister. But it’s a missing entry from that diary that’s also landed him in hot water, or at least seen him drizzled in it, with a series of headlines dating back several months questioning the omission. As we’ll get into below, there are now escalating calls for intervention from the prime minister and parallels with previous ministerial (non)disclosure dramas being invoked.

A ‘cock-up’ or a conspiracy?

Regular readers of The Bulletin will be familiar with this saga, but we’ve only discussed it in passing so it’s understandable if the key threads have passed you by. Let’s start at the beginning. Newsroom’s David William has led the coverage of this, beginning in May when he reported on an undeclared dinner between Jones and mining boss Barry Bragg a few months prior. Undeclared meaning this meeting was not available on Jones’s public diary until after it was reported on. Ministers are expected to publicly declare all meetings related to their ministerial business.

The meeting was newsworthy because Bragg claimed that he was encouraged by Jones to put a project forward for consideration for the government’s controversial fast track bill, which opened the door to concerns that it amounted to undisclosed political lobbying. Jones is one of three ministers expected to have decision-making powers under the fast track bill, as my colleague Shanti Mathias explained last month. Jones defended the diary omission as a “cock-up” rather than a conspiracy, reported RNZ, saying not all meetings fell under the disclosure rules. “It depends what pōtae I wear. A pōtae is a cap. Some caps are NZ First, some caps are ministerial.”

Open and transparent

The reason this saga has dragged on from May until now comes down to Jones himself. The latest update from David Williams, also reported on by The Post’s Thomas Manch, was just this week when it was revealed that while Jones had initially claimed the dinner was a “last minute thing”, it had actually been teed up by one of his staffers. As Williams reported, Jones has “refused” to answer follow-up questions and his press secretary told Newsroom “the matter is now closed”. That may be how the minister views it, but in politics, perception is everything. And the perception of transparency (or a lack thereof) has brought down ministers in the past.

It was an undisclosed meeting that saw the end of Clare Curran’s political career back in 2018. As the Herald’s Nicholas Jones reported at the time, Curran was removed from cabinet after a meeting with entrepreneur Derek Handley. There were several added complications, such as that it was Curran’s second offence, that she was the minister for open government, and that she had once uttered the now immortal line that Labour would be “the most open, most transparent government that New Zealand has ever had”. Nevertheless, at its core, Curran’s fall came down to a failure to disclose a meeting. One that – like Jones – she claimed had been informal.

The fallout, and the ongoing questions

Labour’s Chris Hipkins was asked about Jones while on his morning media round yesterday, telling TVNZ’s Breakfast that the prime minister should be pulling Jones into line. And he invoked a more recent ministerial scandal that saw Christopher Luxon, then opposition leader, calling for a punishment. “In the last government, ministers lost their jobs for not declaring things,” Hipkins said, a reference to former minister Michael Wood’s undeclared shares. At the time, reported the Herald, Luxon had criticised Hipkins for being “weak” for failing to intervene earlier. Of course, in that instance it was a Labour leader being asked to punish a Labour minister. This time around, the one person we haven’t heard from is Winston Peters, Jones’s boss. As parliament returns next week, expect further questions to be asked.

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