Fuel and labour cost increases have put pressure on pandemic-hit airlines - and travellers. Photo / 123RF
A New Zealand airline group says airfares show little sign of returning to pre-pandemic levels, even when more capacity returns.
And the extra costs being put on Kiwi travellers are being pushed into sharper focus by this country being increasingly seen as an outlier in requiring pre-departure Covid testing for those coming here.
At the weekend the United States announced it is ditching the requirement which can cost families hundreds of dollars, disrupt travel for days and is seen as an impediment for how quickly airline capacity will return to this country with more competition keeping a lid on prices. Travel and tourism groups have been pushing the Government to do away with the tests for vaccinated travellers before the latest date indicated of when they'll go - July 31.
The travel industry says approved tests are also increasingly hard to find overseas. At Brisbane Airport they cost $72 each.
While the Government has been pushing the ''New Zealand is open'' message, the travel industry says it's more a case of ''sort of'' given this country now stands out as an exception as Australia, some Pacific Islands countries, Singapore, Thailand, much of Europe and now the US have ended the regime.
The added costs come as airfares are spiking around the world.
The Mastercard study found that to the end of April the average airfare around the world that travellers paid adjusted for the distance flown increased roughly 18 per cent since the start of the year.
A Stats NZ index shows domestic airfares have risen by 12 per cent from the first quarter of 2019 (before the pandemic) to the same period this year and international fares are up 50 per cent.
Board of Airline Representatives executive director Justin Tighe-Umbers said some of the international airfares in the market now are artificially high.
''These are being driven by a temporary case of demand for seats outstripping supply. Airlines are unable to put on as many flights as they would like – labour shortages are having an effect, and demand is rebounding incredibly fast globally and domestically in Australia.''
Over time this was expected to correct itself, he said
The current strong demand to visit family and friends overseas after two years of border closure will eventually taper off. Steps such as faster workforce immigration processing will help ease the staffing shortfalls, and speed up airlines' ability to put on more flights.
More flights were being loaded into the system for the New Zealand summer.
''This shows strong confidence in the strength of New Zealand as a holiday destination, especially out of North America. The extra flights mean strong competition and downward pressure on airfares.''
He advised travellers to keep an eye out for sales. Already capacity planned for this summer is two-thirds recovered to pre-Covid levels, a much faster rebound than it was looking six months ago.
''However, even with the extra flights this summer it is unlikely airfares will reset to the record low levels seen pre-Covid. There are strong headwinds for airlines. Jet fuel remains near record highs, and global inflation continues to drive up operating costs.''
Air New Zealand on Friday said its full-year pre-tax loss was likely to be around $750m rather than $800m largely due to the stronger than expected demand for travel.
It did warn that it faces increased underlying costs. Border agencies, Airways and airports are also looking to recover costs.
The Customs Service and the Ministry for Primary Industries hiked the border processing levy (BPL). From last December, the BPL increased from $20.11 to $43.73 per airline passenger return trip, and from $21.06 to $36.72 per cruise passenger.
Tighe-Umbers said airlines flying here are very sensitive to costs and were paying off record debt levels accrued over two years of global disruption.
''Agencies and airports are going to have to be very disciplined with their charges if we are to avoid losing airline capacity and stalling recovery of the sector.''
During what was known as "The Golden Age of Travel" airfares dipped to record lows. In May 2018 China Southern return flights (with two stops) between Auckland and Rome were on sale for $999. In the past few months some transtasman travellers have been paying more for one-way flights between Australia and New Zealand.
Flight Centre Travel Group's general manager product Victoria Courtney advised Kiwis keen to head abroad is to book early. Alternatively, a good way to find better availability and price is to explore indirect routes, she said. For example, flying via Fiji to get to the US.
She too is expecting more capacity to have returned by November and ''hopefully'' see prices come down into 2023.
Google Flights shows travel booked six weeks out - taking in part of the July school holidays - can vary sharply in price.
Economy flights from Auckland to Sydney on July 22 and returning a week later show Jetstar at $679, LATAM at $683, Qantas at up to $850 and Air New Zealand at $897.
Using the same dates, Auckland-Los Angeles return show: Air Tahiti Nui at $1723 (but with an overnight stop pushing journey time to 32 hours) Fiji Airways with a brief stop in Nadi (journey time 15h10min) at $1876 and Air NZ at $2890
Demand for business class is strong for most airlines and this is reflected by Air NZ's business premier seats - $14,462 and the return flight is via Vancouver with Air Canada flying the first leg to the Canadian city.
Singapore is a popular stopover and is re-emerging as a destination in itself. Singapore Airlines flights on those dates add up to $3111 and Air NZ is at $3441, according to Google Flights.
Air New Zealand this week has been running special deals to Pacific destinations starting at $200 one-way and Hawaiian Airlines - returning on July 4 - has flights between Auckland and Honolulu at $440 one-way for travel later in the year.
With fuel prices surging one response by airlines has been to impose fuel surcharges on top of the base fares for flights. The sudden increase in the price of jet fuel in the first quarter of this year triggered the reintroduction of fuel surcharges by a number of airlines. The first were seen to impose fuel surcharges in March, analysts OAG say.
The highest fuel surcharges make up as much as 26 per cent of the fare on the market as is evident on some of the transatlantic fares. Surcharges on long-haul flights both to Europe and Asia from the United Arab Emirates are almost as high.
However, not all airlines or routes have fuel surcharges and it seems that fuel surcharges are much more likely to be applied to international flights rather than domestic flights, North American flights rather than Asian flights, and longer flights rather than shorter flights.
Air New Zealand dropped special fuel surcharges more than 15 years ago.
In other countries they are banned altogether, such as the Philippines and Brazil, while others have tried to ban them but have subsequently brought them back.
''Almost certainly we will see more surcharges and the levies may rise. Partly this is a function of rising demand for air travel as recovery gets underway, and therefore more demand for jet fuel, but it is also a result of supply-side issues.''
Refineries, which haven't needed to produce quantities of jet fuel that they used to before the pandemic, now need to increase production in an environment where there are competing calls on their capacity.
Fuel surcharges remain largely hidden at most airlines as travellers are presented with the all-in price.
''But for airlines, fuel surcharges are an effective means to address the sharp increase in fuel costs that has happened this year and, rather than face yet more challenges to their financial recovery, allow them to offset the extra cost and help them return to financial health,'' OAG says.
A 737 Max fuselage panel broke free shortly after takeoff in January 2024.