Airfare pain: Whopping surge in international prices as millions more travel on Air NZ

High demand for air travel and a shortage of capacity pushed international airfares up 19 per cent in the final quarter of last year.

Westpac says domestic fares were also up by 14 per cent in the three months, according to the latest Consumers Price Index (CPI).

This came on top of similar increases in airfares for the previous quarter.

And millions more people are paying higher fares.

The Stats NZ figures today were released as Air New Zealand said it carried 50 per cent more passengers last year than in 2021 - up from eight million to 12.3 million.

Westpac senior economist Satish Ranchhod said the increases were ‘’extraordinary,’' and contributed to the 1.4 per cent CPI rise for the quarter and an annual increase of 7.2 per cent.

‘‘Inflation has also been boosted by the post-Covid recovery in both domestic and international tourism. That contributed to further large increases in transport costs.”

He said the impact of rising mortgage rates, especially for those coming off low fixed rates, would have an impact on demand for travel, traditionally highly discretionary spending, in 2023.

The rise in hotel rates is reflected in what the ASB described as ‘‘sizeable’' increases for accommodation services inflation, of 4.7 per cent for the quarter and 14 per cent for the year.

Air NZ, the main airline operating international and domestic routes, last year attributed its fare increases to higher operating costs.

It blamed fuel for increased costs but prices had now fallen back from the highs of early last year after Russia’s invasion of Ukraine.

The airline has said prices are driven by strong demand at a time when its capacity hasn’t recovered to pre-Covid levels.

Across the airline sector, the domestic network is running close to 90 per cent of pre-Covid levels and international about 70 per cent.

More capacity is being steadily restored with the reopening of China.

Mainland Chinese carriers, China Southern and China Eastern, are building capacity up to daily. Discounted flights through China were among the cheapest to Europe before the pandemic.

Air NZ figures out today show 9.4 million customers travelled on the domestic network last year, up from 7.4 million passengers in 2021.

With the international border reopening, 2.9 million customers travelled with the carrier compared to 500,000 in 2021.

Chief customer and sales officer Leanne Geraghty said 2022 was an incredibly busy year with the border reopening.

The airline restarted 24 international services, and has hired 2200 staff to boost its headcount to 10,500 - 2000 short of the pre-pandemic peak.