Simon Nixon: Airport management must make it happen

Simon Nixon says there's still challenges ahead for Hawke's Bay Airport bosses. Photo File

After decades of anaemic performance Hawke's Bay Airport is showing real life.

My calculations suggest passenger numbers are likely to have topped 700,000 for the June 30 financial year, up from 476,000 only than three years ago, 451,000 five years ago and 449,000 10 years ago. Air New Zealand as the dominant operator are providing much of the increased capacity but the improvement has really been driven by the reduction of airfares following the arrival of Jetstar nearly three years ago.

The reduced cost of flying has helped to grow visitor numbers, made it easier for business people to travel to and from Hawke's Bay and has reduced the cost of visiting friends and relatives, going on holiday or travelling for education, medical or other reasons. Aviation is important because it connects us to the rest of the country and the rest of the world. We can stand still or we can move ahead.

In late 2017 the Airport Board committed to a $16 million terminal expansion to accommodate an anticipated 800,000 passengers by 2024.

Continued growth has resulted in 800,000 passengers now being expected by 2020 just two years away, increasing further to one million by 2025. As a result before the first stage has even been completed a further $4.5m spend on the terminal is planned, bringing the total cost to $20.2m.

The accelerated timetable seems to be based primarily on the extrapolation of the recent growth experience. In the short term the buoyant economy may help but such conditions never last and there are darkening clouds on the horizon.

If the airport wants to maintain high growth the board and management must make it happen rather than just hoping it will happen. The growth spurt resulting from Jetstar's lower airfares was apparently not anticipated which is worrying because everywhere else budget airlines have turned up airfares have dropped and demand has boomed. The appointment of a chief executive with aviation experience is a positive move.

Some time ago Business and Economic Research Limited (BERL) suggested a price elasticity of 1.2 for air travel. That is for each 1 per cent reduction in air fares, demand will increase by 1.2 per cent. While it's difficult to determine exactly how much fares have come down, at the cheaper end of the market flights to Auckland that once cost $100 are now around $50, suggesting a huge reduction at the budget end of the market.

We are probably nearing the end of the high growth resulting from reduced fares and it would be unwise to expect a continuation without either further reductions in airfares, new services or other demand stimulating changes.

The airport now anticipates another 50,000 passengers a year, equivalent to about a 7 per cent growth for each of the next two years followed by a further 40,000 for the following five years.

Recently Originair announced new connections to New Plymouth and Palmerston North with onward links to Nelson. This is great as both Nelson and New Plymouth are difficult places to get to by air or road but the four return flights a week adds less than 1 per cent to overall capacity through Napier, so it's not a game changer.

Perhaps more significant is the near simultaneous announcement by Air New Zealand of an additional 12 one way flights a week to Auckland, or nearly one return flight a day. I am always a bit dubious about Air New Zealand claims but if it's a true increase it's equivalent to a 3.5 per cent increase in capacity.

Any additional capacity will be beneficial but extra seats between here and Wellington or Christchurch are also needed as it seems fares to the southern centres are well out of kilter with those to Auckland. Hardly surprising because competition from Jetstar is limited to Auckland services.

It's also possible the new flights are a precursor to Jetstar pulling out of local services as part of the recently announced code share arrangement between Air New Zealand and Qantas which would be a total disaster for Hawke's Bay.

With just two or three daily Air New Zealand return flights to Christchurch and five to Wellington, it's hard to imagine Jetstar adding these destinations to its Napier services, though we shouldn't give up trying to get them.

Further new domestic connections are limited to routes offering similar limited potential to the new Origniair flights.

Interestingly the airport plans seem to have made no provision for airbridges or passenger screening suggesting that other than a few more seats to Auckland the national airline has no plans for meaningful improvements to Hawke's Bay services.

If the airport board, council and government owners want to make a real difference they need to commit to a meaningful improvement in aviation services, especially direct flights to Australia.

* Simon Nixon is a Hastings district councillor