Air New Zealand warns travel agents of increase in domestic fares

Air New Zealand has told travel agents that long-term domestic fares across all routes will be increasing from April 23.

In an industry note, the airline warned agents that all existing bookings must be ticketed on or before midnight on Monday, April 22, to avoid the new fares.

Air NZ told the Herald this afternoon its pricing will remain “dynamic” and will vary depending on demand, type of aircraft and length of flight.

Acting general manager domestic Jeremy O’Brien said today that like many Kiwis and businesses, Air New Zealand has faced increasing costs over the past couple of years.

“As we’ve previously signalled, our cost base has risen by more than 30 per cent and, to date, we’ve absorbed as much of this as we can. However, to reflect the higher cost of providing air services, we need to continue to review our pricing.”

When the airline released its pruned down half-year profit in February, chief executive Greg Foran warned domestic fares would go up. He said steep increases as the airline emerged from the pandemic had moderated but warned then that higher costs would see them going up again.

The airline dominates the domestic market. On many routes it is the only carrier and has more than 80 per cent of the overall market. Smaller airlines have also increased their fares.

A survey this week found the domestic airfare market was regarded as the least competitive of any business.

Air New Zealand and other airlines are in a bitter dispute with Auckland Airport, which will raise aeronautical charges to pay for billions of dollars of new infrastructure.

There is also disagreement about how much fares have risen, but Stats NZ figures show domestic airfares rose by 7.4 per cent in February.

Air New Zealand general manager domestic Iain Walker last month said domestic fares were up 2 per cent year on year, which is below inflation and the increases the airline had experienced in operating costs.

“That’s why we’re taking steps to ensure our fares cover the cost of travel so we can continue to fly Kiwis across the country.”

As airlines have called for Commerce Minister Andrew Bayley to look again at rules covering airports’ price setting, airports have called for the Government to monitor airline prices and performance.

NZ Airports Association said Air New Zealand had hiked its average domestic network airfares by $51 to $200 per one-way airfare for the year ending September 2023, which was a 34 per cent rise on the previous year.

NZ Airports Association said Air New Zealand had increased its average domestic network airfares by $51 to $200 for one-way airfare for the year ending September 2023, 34 per cent up on the previous year.

Walker said his airline and others were concerned about the Auckland Airport redevelopment, which will result in charges increasing from $9 per domestic passenger today to $46 in 2032.

Air New Zealand has been asked for more details of the notice sent to travel agents.

Grant Bradley has been working at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.