Data from Stats NZ shows domestic airfares were again adding to the cost of living for Kiwis, increasing 7.4 percent in February compared with January 2024.
Fares had been trending down but Air New Zealand warned when it released it half-year results last month that it would increase domestic fares to boost profits as it faces more competition on its international routes.
NZ Airports Association chief executive Billie Moore said Air New Zealand had not only upped its domestic airfares yet again, it was also increasing the cost of add-ons such as bag check.
“It’s flagged that other costs, like checking in your pet, could also be in for a future price hike.
“This is incredibly difficult for domestic and regional travellers. They’re already frustrated about how much they’re having to pay to fly, as well as high cancellation rates for Air New Zealand in some regions.”
Citing Infare data, Air New Zealand hiked its average domestic network airfares by $51 to $200 per one-way airfare for the year ending September 2023, a 34 percent rise on the previous year.
“But some passengers will be forced to pay more than this. For example, a return airfare from Tauranga to Nelson this weekend can cost as much as $1160 if you want to check a bag.”
She said Air New Zealand blamed Auckland Airport for cost increases when its own domestic airfares and cost add-ons were driving up the cost of domestic travel for consumers. Airport charges only make up a fraction of a ticket.
“With 86 percent of market share, our domestic monopoly airline essentially dictates the price, routes and flight schedule available to regional New Zealanders. Things are likely to get even harder with Air New Zealand’s aircraft shortage and engine maintenance issues.”
She said New Zealand had the least competitive domestic aviation market in the world, as Air New Zealand controlled 86 percent of the market.
The second least competitive country is Bolivia, where one airline holds 84 percent , followed by Turkey where one airline holds 69 percent of the market, followed by Argentina and Nepal with one airline in each country holding a 67 percent share, she said, citing Sabre market intelligence.
Air New Zealand has been contacted for a response to NZ Airports’ comments.
Moore said the Australian government was shining a light on competition because it regards its airline market as highly concentrated, with the Qantas Group holding 61 percent of the domestic market – low compared to Air New Zealand’s share of ours.
Australia’s Competition Taskforce has found that fares reduce by 29 percent when a second airline is on a route.
Prices reduce by a further 31 percent with a third airline operating. Consumers pay less than half of the monopoly price on a given route if three airlines are competing against one another.
In New Zealand there has been no policy effort to create the conditions for greater market competition in air passenger transport.
And unlike in Australia and other developed countries, there is no transparent airfare and market performance monitoring in New Zealand to support consumers paying a fair price.
“The government has the tools to take action,” Moore added.
“The legislative work is already done - the new Civil Aviation Act 2023 provides the Ministry of Transport with the information-gathering power to set up an independent airfare monitoring process.
“Let’s start now to ensure we have appropriate scrutiny on airline performance and pricing and consumers can see for themselves if they are getting a fair deal, now and in the future.”
