“Air travel is an especially important form of connectivity for New Zealanders, and high airfare prices are difficult for consumers and businesses alike.”
Consumer NZ chief executive Jon Duffy was pleased the minister acknowledged the problems in the aviation market.
“But [Consumer NZ] disagrees that a market study would not help,” he told the Herald.
‘’Market studies provide an independent mechanism, free of industry influence, that Governments can use to make robust, evidence-based decisions on how to fix broken markets. We won’t know the best solutions if we’re afraid to ask the questions,’' he said.
There have been several studies in the past few years – into groceries, fuel, building supplies and banking.
Duffy said the commission could undertake a market study in parallel with its existing work programme.
‘‘If the commission needs resources for this important work, this should be given due consideration. We hope the minister reconsiders his position.’'
Last week, Bayly said rampant inflation had hit some sectors harder than others, and increased input costs for airlines.
“Fuel and maintenance costs have increased significantly over the last few years, which has naturally flowed through to airfare prices. I also understand that our main carrier, Air New Zealand, has experienced engine issues with a number of its planes meaning it is not able to operate at full capacity.’”
New Zealand’s distance from the main aviation hubs and other big population centres, plus a small, dispersed population will likely always mean we are not an easy, or particularly attractive market for new airlines to enter.
In Australia, competitors to Qantas and Virgin Australia including Bonza and Rex had struggled.
Australia had about five times as many people but still struggled to support new, disruptive airlines.
Jetstar ran a regional operation in New Zealand for four years but pulled out in 2019 after it failed to make money.
Bayly said from a regulatory point of view there was little to stop a new airline setting up in New Zealand. He said he would welcome any new competitors in the domestic airline market.
“From a consumer’s perspective, price comparison websites offer transparency for airline pricing. I would encourage consumers to use these sites and look for alternatives where possible.”
Air NZ has said it would participate in any study, and did not deem it appropriate to express a view at this stage.
Duffy said a market study would determine to what extent Air NZ might be taking advantage of its virtual monopoly.
“For many New Zealanders, there’s Air NZ or nothing – and high fares are affecting our regions.”
A Commerce Commission market study won’t solve anti-competitive behaviour, but getting information about how competition is working in the sector will highlight what interventions may be necessary and provide confidence New Zealanders aren’t being ripped off.”
Airports Council International research out today shows other Asia-Pacific markets suffering from steep increases in airfares.
A study found domestic airfares during the first half of 2024 compared to 2019 levels were up in India (by 43%), Vietnam (+63%), Malaysia (+36%), Thailand (+26%), and Australia (+21%).
Despite the anticipated recovery in international seat supply in these countries, airfares were still elevated compared to pre-pandemic levels.
In India and Vietnam, international fares rose by 16%, Malaysia by 21%, Australia by 14%, and Thailand by 7%, with low-cost carriers (LCCs) contributing to the sharpest increases.
Grant Bradley has been working at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.
