A Horizon Research survey has found consumers believe the domestic airfare market to be New Zealand's least competitive.
A Horizon Research survey has found consumers believe the domestic airfare market to be New Zealand's least competitive.
The domestic airfare market has been ranked New Zealand’s least competitive, trailing supermarkets, banks and petrol companies.
A Horizon Research survey found that 75 per cent of respondents considered the domestic aviation market – overwhelmingly dominated by Air New Zealand – to be the least competitive.
The omnibus survey of 1020 adults in March was instigated by Horizon and was aimed at finding which markets New Zealanders believed provided fair services and prices.
None of the 12 markets measured had a rating of more than 5.7 out of 10, where 0 was very uncompetitive and 10 very competitive.
“There’s a clear view among New Zealanders that there’s a lack of competition,” said Horizon principal Graeme Colman.
“They’re not getting good service and competitive prices and it’s quite strongly evident that domestic flights are viewed as the least competitive market in the country.”
A breakdown of the domestic flight data shows only 4 per cent of respondents ranked it as very competitive and 22 per cent thought they were very uncompetitive.
By region, 56 per cent of those on the West Coast ranked the market very uncompetitive followed by Southland (44 per cent) and Gisborne and Hawke’s Bay (42 per cent)
The regions happiest about the air market were Northland and Whanganui/Manawatu/Horowhenua, where 15 per cent ranked domestic flights very uncompetitive, followed by Wairarapa (16 per cent) and Auckland (17 per cent).
NZ Airports Association chief executive Billie Moore said the results showed the lack of competition was something that needed to be taken more seriously.
Air NZ operates more than 80 per cent of the domestic market.
Association figures show Air NZ has 86 per cent of the domestic aviation market.
“Having a strong national carrier is important to our country,” Moore said. “However, Air New Zealand’s market dominance is not normal by any global standards and it has natural flow-on effects for consumers.”
Airline competition has the greatest influence on airfares. Australia’s Competition Taskforce found that fares fell by 29 per cent when a second airline was on a route and a further 31 per cent if there was a third airline.
According to the association, Air NZ fares are up an average of 34 per cent compared with last year. For most regional consumers, the airline – which is 52 per cent owned by taxpayers – is their only choice.
Cancellations were having a dampening effect on confidence to travel in some regions, Moore said.
“It’s not just about airfares but also about resilience. Air New Zealand’s fleet constraints, particularly while they undertake remedial work on their Pratt & Whitney engines, means regional connectivity is likely to reduce rather than increase over the next three years.”
It highlighted the reliance of the network, and consumers, on one main operator.
“It will also have a direct effect on the Government’s goals to boost regional development. There has been no policy effort to create the conditions for greater market competition in air passenger transport in New Zealand.”
Moore said there was no easy fix but a logical first step was to monitor airfares.
Jeremy O’Brien, Air NZ’s acting general manager domestic, said the airline welcomed competition and was competitive on several domestic routes.
“New Zealand is an open skies environment, which means there is no limit on airline capacity or quantity of operators in the market.”
“Similar to other operators in the New Zealand market, we’re taking steps to ensure our fares cover the cost of travel so we can continue flying our customers around the country. As always, we encourage our customers to book in advance to secure the best fares.”
When asked about the association’s concerns about airfares last month, Transport Minister Simeon Brown said the Government was concerned about the cost of living.
“The Government wants to see improved competition between operators and has an open mind around steps needed to assist with ensuring this,” Brown said.
The Horizon survey was conducted nationwide between March 22 and 26. The 1020 respondents were aged over 18. The data was weighted on age, education, ethnicity, personal income and region to match the adult population. The company said the survey had a maximum margin of error of plus or minus 3 per cent overall.
Grant Bradley has been working at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.
