Air New Zealand is seeing no drop-off in demand despite economic headwinds.
Airline bookings are usually early indicators of changing demand patterns and Air NZ continues to see travel running hot.
The economic outlook has been worsening for some time and the Reserve Bank this week forecast New Zealand would head into recession next year. The bank’s governor Adrian Orr has urged Kiwis to cut spending in a bid to cool inflation but there’s no sign of that flowing through to travel on Air NZ – yet.
“At this stage, we’re not seeing any reduction in demand,” said Leanne Geraghty, the airline’s chief customer and sales officer.
“But of course, it is definitely something we monitor on a daily basis.”
House of Travel says there has been no slowdown in Kiwis buying travel in the leadup to Christmas. Booking volumes in November are at the same level as the preceding two months and are now back at 2019 levels both for holiday and corporate travel, said commercial director Brent Thomas.
“From client feedback we know there were a lot of people who missed out on holidays in 2022 due to capacity issues and they are ensuring they don’t miss out in 2023 by booking early.”
He said it was expected that 2023 would be a good year for travel.
High levels of demand pent up when borders were closed were still apparent.
“People are keen to reconnect with loved ones, explore the world and ensure they are getting to experience all they have on their bucket lists,” said Thomas.
“Time doesn’t wait for anyone, and New Zealanders are ensuring they don’t waste any of their precious time to enjoy what life has to offer through travel experiences.”
As demand is running strong, Air New Zealand is adding back capacity as quickly as possible and over the summer its domestic network will be on a par with pre-Covid levels, boosted by the arrival of two Airbus A321neos with 217 seats. That will add around 550 seats a day to the 35,000-40,000 seats the airline flies daily.
Geraghty said the extra capacity was much-needed. “In terms of the domestic capacity, we’re going to be operating pretty much in the pre-Covid levels.”
High demand and reduced capacity around the world have pushed up fares but so far airlines report passengers are prepared to pay them and strong yields have pushed many of them into operating profit in the second part of this year. Air New Zealand is operating in the black and this week Qantas upgraded its profit forecast and signalled a bonus of $12,000 for 20,000 workers.
Air New Zealand, 52 per cent owned by taxpayers who have provided over $2 billion of direct and indirect support during the pandemic – has been under fire for high fares. A 20 per cent leap in air fares was recorded in third quarter Consumer Price Index figures.
Geraghty said the airline was “acutely focused” on providing affordable airfares.
It was facing high fuel and increasing labour costs.
“We’re acutely focused on it (the fare level) and the best advice we can give is to book as far out as you possibly can to secure those cheap fares because they do get snapped up very quickly.”
Capacity will be further boosted on international routes with the return of three more Boeing 777s in the first part of next year and she said this would be good news for travellers. “I think as we bring in more capacity, that’s very positive for airfares. We’re operating in a high demand and capacity constrained environment at the moment with elevated costs and so, any additional capacity that we can bring into the network obviously will have impact on pricing,” she said.
Variables include how costs move and how other airlines operate, “but more capacity is definitely a pathway to us being able to bring our prices down”.
Geraghty said more than 2000 staff had been hired since the beginning of the year and the airline had taken steps to give it more flexibility during peak holiday periods. Sickness and bad weather had badly affected schedules during the July school holidays and some flights had been de-scheduled, and wet lease operator Wamos had been chartered over summer for Auckland–Perth flights to build padding into the system.
Like other businesses, the airline had been affected by the Covid surge but that was stabilising now. The airline will carry around 2.8 million passengers on its network between December 15 and January 31 next year.
In the same period last year, the airline carried just 1.1 million passengers. This summer the most popular international destinations for Kiwis are Los Angeles and Sydney.
“They’re the two standouts. But in saying that, all of our international network is very heavily booked across the period.”
Geraghty said New York flights which started in September were going “incredibly well” with the favourable exchange rate for Americans helping boost demand during the New Zealand summer.