Airfare skirmish: Air New Zealand and Airports NZ trade blows

Air NZ says it has sold 600,000 cut price fares on regional routes in the past 12 months. Photo / Andrew Warner

Air New Zealand has released figures showing it has sold one million domestic airfares for less than $50 in the past year, a day after the body representing airports pointed to an 8.5 per cent overall increase in the last 12 months.

Inflation data showed airfares had increased 12 per cent in the last quarter.

Airports New Zealand says the 12-month increase coincided with Jetstar's withdrawal from regional routes and the impact of an agreement between Air New Zealand and Qantas to co-operate in each other's domestic markets.

Airports NZ chief executive Kevin Ward said the price increase means every domestic passenger was paying $14 more for their flight, on average, compared with the same period 12 months ago.

"Families, businesses and tourism will be the losers from the big jump in flight costs," said Ward.

"Increased fares translate directly to fewer people able to travel".

Air New Zealand dropped lead-in fares to boost domestic demand when the market softened early last year. It also pledged to hold lead-in fares for a year at levels sold on Jetstar regional routes which the Qantas subsidiary pulled out of at the end of last year.

It reduced its lowest fares on 41 domestic routes in February 2019, reducing some by up to 50 per cent.

This meant some fares between the North Island and South Island fell as low as $39.

Air NZ chief revenue officer Cam Wallace said the response to the reduction to the airline's lowest fares has been fantastic.

"When we announced this overhaul in February last year, we committed to making three quarters of a million seats a year available for less than $50. It's terrific to have well and truly surpassed this and to hit the one million milestone.''

About 600,000 of these fares sold for under $50 have been for flights on regional routes, said Wallace.

He said the airline "remained committed'' to low fares but advised passengers to book early to get the best possible deals.

Airports and airlines are lobbying the government over changes to the Civil Aviation Act, with airports worried about proposals that could change the way they set prices.

Ward said according to his organisation's calculations, the leap in domestic airfares will cost passengers an extra $165 million for a full year.

"Domestic air fare increases on this scale are many times greater than the rate of inflation, and have a choking effect on regions at a time the Government is investing in provincial economies," he said.

There was no official data on fares for individual routes, so it was difficult to tell if some cities and towns have been harder hit than others.

The body representing airlines operating here, the Board of Airline Representatives, said NZ airports had fired double-barrelled shots across airlines' wings.

Executive director of BARNZ, Justin Tighe-Umbers, said domestic airfares have increased, but it was a verifiable fact that airlines are under cost pressure.

"Jet fuel prices have steadily climbed by around a third since 2017 and costs for air navigation and CAA services are rising. Airfares rise in response to cost increases. "

Tighe-Umbers also said it is just scaremongering by NZ Airports to say New Zealand's regional airports are put at risk by the Government's proposal to remove a clause in the CAA legislation that allows airports to "charge as they think fit".

"On the contrary, airlines want regional airports to invest for growth in terminals and services – and they have shown they're willing to fund investment," he says

"We've seen this recently with new terminals and upgrades at airports in Nelson, New Plymouth and Tauranga.

"Changing the legislation should not change the commercial model between airports and airlines. Airports will continue to be able to negotiate freely with airline customers," he said.