Airline capacity is coming back - what it means for airfares

Air New Zealand says it "welcomes competition" as rival American Airlines returns with cut-price fares on key trans-Pacific routes.

As Air New Zealand prepares to launch non-stop flights this weekend between Auckland and New York as part of its key United States strategy, American Airlines is advertising discount promotional fares between the two countries.

While travel agents say it is still too early to judge whether fares are past their pandemic peak, the surge in capacity to North America, in particular, will at least keep a lid on them.

Government figures out today show the North American market is recovering faster than others, with operating capacity forecast at 91 per cent of pre-Covid levels by February next year.

Air New Zealand today said it was catering to increased demand by increasing the frequency of its Auckland-Vancouver flights from three flights a week now to daily from December 9.

The American Airlines fares are outside of peak Christmas and January periods during the airline's summer season but return Economy between Auckland and its Dallas-Fort Worth hub start at $1431 in mid-November.

Air New Zealand also flies to Texas and Houston with return Economy flights starting at $1922 around the same time. American is also offering a range of destinations beyond its hub with one-stop New York flights starting at $1877 return in November, $600 below Air NZ's non-stop flights to the Big Apple.

Air NZ's chief customer and sales officer Leanne Geraghty said it welcomed competition back into the skies and continue to be focused on growing its network into North America. Following the launch of New York services, Chicago flights would resume on October 30.

"As our network grows, we look forward to offering more deals for travellers," she said.

Discounting by American Airlines is a sign that pre-pandemic pricing tactics are returning and follows the release of Early Bird fares by Singapore Airlines earlier this week, the first time in three years it has used the strategy. Prices for some European flights start at under $2200 on the airline for next year.

Qantas is going head to head with Air NZ on the Auckland-New York route next year. Photo / James D Morgan

House of Travel commercial director Brent Thomas welcomed the American Airlines fares.

"American Airlines have some very appealing launch fares in the market and Kiwis are quickly learning about the amazing array of options for Kiwis to travel further past Dallas on their network."

However, there hadn't been as much of a competitive response as would usually be expected, an indication that air capacity was still low and demand high compared to pre-Covid times. And there is still considerable demand from Kiwi travellers.

"At this stage it is difficult to determine if we are through the pricing peak – that will depend on whether or not we continue to see a lift in capacity coming back into New Zealand, and also what impacts fuel costs have over the coming months," said Thomas.

There were still capacity constraints for airlines, but they continue to push hard to recruit crew and ground staff to meet the demand.

Flight Centre's general manager product, Victoria Courtney, said it was still experiencing high demand and with capacity levels still limited it was not expecting prices to drop rapidly in the short term.

While there had been some tactical sale fares for travel in 2023, they were not at pre-Covid levels.

Ministry of Business Innovation and Employment figures show international arrival capacity was under 10 per cent of pre-Covid levels at the start of the year but by next February will be at 75 per cent.

Services on the busiest route - the Tasman - are forecast to be at 80 per cent by then.

Details of non-stop services between Auckland Airport and North America, as of late last month:

Air NZ to Hawaii three times a week, San Francisco three times a week, Los Angeles up to 10 times a week, Vancouver three times a week (increasing to daily), Houston three times a week, from this weekend New York three times a week, from October Chicago three times a week.

Hawaiian Airlines three times a week to Honolulu.

United Airlines three times a week to San Francisco from October 3, moving to daily from October 28.

American Airlines daily, non-stop to Dallas Fort Worth between October and March.

Air Canada up to five times a week to Vancouver between November and March.

Qantas three times a week initially, to New York from June next year.