A recent Consumer investigation into domestic flights found dynamic pricing could increase the price of the same ticket from Auckland to Dunedin by up to four times as much.
An Air NZ spokesperson said demand-based pricing was not unique to the airline.
It was standard practice across airlines, hotels, and rental car companies.
“School holidays see demand soar and this approach allows us to manage supply and demand. We would love to add more capacity over these busy periods, however, with seven of our aircraft currently out of service due to global engine supply issues, there are no spare aircraft to add to the schedule.”
Customers should book early to secure the best deals, said the spokesperson.
Consumer tracked the price of 648 flights over 18 weeks for a family of four (two adults and two children aged under 11) to travel return to Australia for 10 days with Air New Zealand and Qantas.
Flights departed from Christchurch, Wellington and Auckland en route to Brisbane and Melbourne. All prices referred to in this investigation are inclusive of return tickets for four people.
Consumer checked out prices 16 weeks before departure, six weeks before departure and two weeks before departure, to see how lead-in times affected prices. Each person had one checked bag included in their ticket.
Tickets purchased for a departure date of July 10, four days into the July school holidays, were on average $3916 more expensive than tickets purchased for June 19, three weeks earlier - an increase of 141%.
It also found that tickets purchased for a departure date of October 2, four days into the September school holidays, were on average $1374.53 more expensive than tickets purchased for September 11, three weeks earlier, an increase of 38%.
“In the most egregious instance, the cost of tickets for four from Christchurch, booked two weeks out from departure rose to $9014. Three weeks earlier, flights booked two weeks out cost just $3378. That’s an increase of 167%,” said Consumer’s Vanessa Pratley.
“We think paying $5636 more for the same seats and service is a rip-off for families wanting to travel at one of only four opportunities throughout the year.”
Consumer also tracked the price of tickets for the same family to travel from Christchurch, Wellington, and Auckland to Melbourne, Australia, but didn’t observe the same price hikes. It was the destination – and its perceived desirability – that made the difference.
Choosing to fly Air New Zealand across the Tasman in the first week of both school holidays cost families $1230 more on average than flying Qantas.
“In other words, Air New Zealand flights were on average 34% more expensive than Qantas flights during the holidays. On average, Air New Zealand was $478 or 16% more expensive to fly with at any time.”
From term time to school holidays, Air New Zealand flights increased on average by 43%, whereas Qantas flights increased on average by 24%.
Consumer says the dynamic pricing tactic has come under fire in other industries, such as for event and concert tickets, especially “in-demand” tickets sold by Ticketmaster.
“On the route with the steepest price increases during the holidays [Christchurch to Brisbane booked two weeks out], tickets purchased with Qantas didn’t suffer the same increases even though it also uses a dynamic pricing model. Is this a sign that Qantas didn’t experience a large increase in demand? Or is there something else going on here?“
In the current economic environment, the best way to get cheaper flights seems to be to book earlier, rather than last minute. A spokesperson for Air New Zealand told Consumer the airline is “working hard to ensure that Air New Zealand flights are accessible to [families]”.
Naturally, consumers expect to pay more the closer they are to departure, but flights booked later for a school holiday departure were astronomical compared to late bookings not made for the holidays, the investigation found.
On average, booking two weeks out instead of six was $461 more expensive when flying from Wellington to Brisbane and Melbourne, $331 more expensive from Auckland and $481 more expensive from Christchurch.
“For flights set to depart on July 10 only, booking two weeks out instead of six was $1645 more expensive when flying from Wellington, and $2881 from Christchurch. The same can’t be said for Auckland, where we observed flights booked two weeks out for 10 July were only $84 more expensive on average than flights booked six weeks out.
“Basically, consumers wanting to pay less shouldn’t book late, should take their location into account and especially shouldn’t book late for a high-demand period. For Air New Zealand, maintaining its dynamic pricing model is implicit in the rules of booking.“
Consumer says while supply and demand do impact dynamic pricing algorithms, “we’re not convinced it’s that simple. We think it’s likely that dynamic pricing allows Air New Zealand to make up profit margins, and it certainly looks like its practices are capitalising on New Zealanders wanting to travel during the school holidays.
“Compared to Qantas, which was consistently cheaper and didn’t have comparable price hikes during either New Zealand or Queensland school holidays, flying with our national carrier to Brisbane looks like a rip off.”
Last year Air New Zealand and Qantas Group (including Jetstar) collectively controlled 87% of the transtasman market. Air NZ controls 43%, while Qantas (excluding Jetstar) controls 29%.
“Air New Zealand has recently had a code-sharing agreement with Virgin Australia approved, something that opponents here said would harm the future potential for competition on transtasman routes.”
Consumer is calling for airlines to communicate honestly with passengers about the reason for cancellations and delays, and clearly display their rights.
Grant Bradley has been working at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.
