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.”