Kerre Woodham: Why would the Government interfere in the aviation market?

We know airfares are expensive, right? Everybody, and I mean everybody, I know who's booked flights recently has made the comment that an overseas flight is cheaper than flying just about anywhere around New Zealand – especially to the provincial centres. Easter was huge in terms of airfares, but even on your normal everyday Wednesday morning, flying to Timaru, flying to Tauranga, it's going to set you back a fortune.  

We've been complaining about Air New Zealand's pricing now ever since we could get back in the air again after Covid, but what can we do? Air New Zealand says its experienced more cost inflation in the past three years than was typically seen in a decade, with Covid, a weak New Zealand dollar, and geopolitics all to blame.  

Richard Thompson, Air New Zealand's Chief Financial Officer says their costs over the past 3.5 years have gone up by roughly 30%. Domestic airfares on average have gone up by around 24%, so they're trying to absorb the costs, they say. He argues that flying is still a relatively affordable way to get around the country, with every $400 or $500 fare, he says, there are thousands of examples of $129 fares or even $99 fares. He said I was speaking with someone before Christmas who wanted to get from Timaru to Napier. They were paying $600 or $700 one way.  

But what's the alternative? You drive to Picton. It'll cost you $100 in gas. If you take the ferry across, that's another $250 or $300. Then another $50 or $60 in gas to get to Napier. He said driving isn't cheap either. But now the government's getting in on the act. Associate Transport Minister James Meager is not ruling out underwriting the expansion of small regional airlines to help maintain routes and keep the price of flying competitive. But truly, the thing is we simply do not have the population base to support viable competition. How many airlines have tried and failed to establish themselves in the market? Just thinking back, in the last couple of decades, Freedom Air, Kiwi Air, and Ansett - they came, they tried, they failed.  

Don't get me wrong, competition is a good thing. We do have Jetstar, bless them and where they fly, you'll generally find the routes are the most competitive in terms of airfares, and the most reliable – because let's not forget about reliability. And I don't think that's a coincidence. I'm supposed to be flying to Tauranga in a couple of weeks for the day, for a job. And I'm supposed to be flying down on Saturday morning and flying back on Saturday evening. I have absolutely no confidence that that will happen. None. I mean, I hope it does, because there's a film crew down there and it will be a costly exercise if I fail to make it. I'm not planning anything for that particular Saturday night because the last time I flew to Tauranga, I got down there fine and then sat for just under 7 hours in the regional lounge waiting for a plane that never came, or it didn't come for a very, very long time. And yes, you can drive, but it's a horrible drive. But what do you do? It's a horrible drive or you accept that there's a very real chance that the plane won't take off when it says it's going to.   

Why, though, is the government interfering in the market? I found it really interesting that successive governments, Labour and National have wanted to tinker with privately owned businesses like supermarkets, and petrol companies, and banks, and now the airlines. They want to sort of tweak and fiddle around to try and bring prices down and make things more competitive, and it's all about the consumer and you know.  

Fabulous. Why don't they bring down the price of power? That's something they do control. The governments are in charge of that. Not everybody flies, we all use electricity. It is what it is. It's expensive to run an airline. Really expensive now in the wake of Covid and it's all been outlined as to why it's so expensive. Flying is expensive. We know that. We baulk at paying the prices if we can. They will allow some subsidies if you're going for a funeral, if there's humanitarian reasons for getting somewhere quickly.  

Air New Zealand can allow for cheaper airfares, but ultimately, do we want the government, that is the taxpayer, subsidising competition in the aviation industry?  I wouldn't have thought that was a good use of taxpayer money. Why on Earth should other taxpayers who don't fly, subsidise those who want to flit off to Hawkes Bay or Queenstown for a jolly. I just don't see why the government should be interfering with the business of flying planes. 

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