The impact of losing airlines from NZ: What the OIA documents show

Official documents reveal that the Government was warned of high levels of concern about the loss of airlines to the New Zealand market because of uncertainty over the country's border settings.

Advice to Transport Minister Michael Wood included gloomy scenarios of services being withdrawn as airlines waited for more certainty last year. Some flights were lost and overseas airlines which fuelled the pre-Covid travel and tourism boom are now weighing up whether they will return, as the Government has not yet said when non-Kiwis will be allowed into the country without Covid restrictions.

A series of emails and a summary of reports from the Ministry of Transport released under the Official Information Act show that border restrictions make it "incredibly" difficult for airlines to operate here, underlining the importance of the Government's $730 million Maintaining International Air Connectivity (MIAC) scheme.

Last year the Herald reported Air Canada's decision to drop its Boeing 777 freight service that flew between Auckland and Vancouver, as it deployed its aircraft to more profitable markets in other parts of the world which were emerging from Covid-19 restrictions.

In a memo, Wood was told the airline was a significant contributor to freight capacity outside the MIAC and provided the vast majority of non-MIAC capacity to North America.

"We have already been contacted by freight forwarders advising that the exit of Air Canada will have a significant impact on exporters already struggling to secure capacity into North America."

Without Air Canada, the only direct connections to mainland North America were Air New Zealand's MIAC flights to Los Angeles and San Francisco.

"The exit of Air Canada reinforces the advice provided previously that as North America and Europe begin to reopen, it will be increasingly difficult to keep large international operators in New Zealand."

In an excerpt of advice provided to Wood after one version of the re-opening plan (now overtaken) the ministry said: "Bringing aircraft back into service or redeploying aircraft and crew to add capacity takes time and requires a significant investment. This is generally not done unless there is a high level of confidence in the information and timelines available."

Passenger numbers through Auckland Airport have been at 40-year lows. Photo / Sylvie Whinray

Airlines are celebrating this week's announcement that vaccinated New Zealanders can enter the country without self-isolating, and hope this will be extended to all arrivals sooner than the existing July start date.

Fewer than half the 29 airlines serving Auckland before the pandemic now fly into the city.

The advice said MIAC has been successful in ensuring that connections to key markets have been maintained and essential passenger movements enabled, and also noted the following:

• The agility of the MIAC scheme has enabled the Ministry to address capacity
shortfalls and losses of connectivity as they arise.

• In May 2021, United Airlines changed its focus to the North American domestic recovery rather than its previously signalled expansion into New Zealand. This led to a significant capacity shortfall to North America. "We do not believe that a return to market conditions is appropriate or even possible at this stage."

• Ease of market entry and exit: The current restrictions on passenger travel mean that entry into the New Zealand market is incredibly challenging for passenger airlines.

• Most routes to and from New Zealand are heavily reliant on just one operator (e.g. Singapore Airlines to Singapore, Air New Zealand to Los Angeles) and there is a limited ability to transit goods through other hubs due to reduced capacity on those routes.

• While the 2021 Reconnecting New Zealanders timetable was helpful, "the events of the last year have taught us that these plans for reopening often get overtaken by events". This uncertainty means that airlines do not have enough information to commit to a return to a market or bring stored aircraft back into service (which means they cannot ramp up quickly when passenger travel does resume). This is evidenced by the confirmation from United Airlines, Air Canada and American Airlines that they do not intend to re-enter the New Zealand market for some time due in part to uncertainty over reopening timelines.

Marginal flights have been helped by Government freight payments. Photo / Supplied

Correspondence from the Ministry of Transport to top officials quotes Auckland Airport as saying that once an airline leaves, it is unlikely to return. As the Herald reported last year, the airport said it can take five years to attract airlines to the country.

They were complex businesses in a highly regulated industry that has long planning cycles. Some also had crew whose unions wouldn't stand for the possibility of staff being stranded here in the event of a lockdown.

Three to 12 months was needed to be able to advertise and sell the seats to fill up the first flight, get crew allocated and gain approval to operate from regulators here and overseas.

Another consequence of airlines deploying aircraft in other parts of the world is that New Zealand will be served by more indirect flights, and by aircraft without the same features that flew here before Covid-19 hit.