Air New Zealand has bounced back financially - and domestic fares have risen steeply. Photo / Brett Phibbs
Air New Zealand has bounced back financially - and domestic fares have risen steeply. Photo / Brett Phibbs
Editorial
EDITORIAL
Air New Zealand's bookings are running hot and have hit a sweet spot for revenue generation.
The airline is enjoying what analysts describe as a yield bonanza and anyone who has booked a domestic flight will know what this translates to: higher prices.
The airline has put up basedomestic prices by up to 20 per cent during the past month, citing higher operating costs. While there will always be cheap lead-in deals, those with high levels of travel flexibility are most able to take advantage of them.
Air New Zealand has always had domestic dominance where yields – revenue per seat per kilometre travelled – are highest. On main trunk flights, Jetstar has provided competition that put a lid on prices but the Australian low-cost carrier is struggling to rebuild its capacity in New Zealand, currently operating at around 60 per cent of its pre-pandemic schedule.
On regional routes, Air New Zealand has little or no direct competition in the air although it competes against the car on shorter flights.
As has been the case for years, fares on some international flights are cheaper than those between New Zealand cities, notably to Hawaii where the airline faces competition from Hawaiian Airlines. The airline points out flaws in comparing prices on a particular day or flight doesn't reflect the whole route and operating a smaller aircraft on a short flight is proportionately higher than a larger aircraft on a longer sector.
But that doesn't diminish the fact that some full-price fares to get around the country are eye-watering.
Travelling Kiwis who have supported the airline during its toughest commercial period can take comfort from some other news.
This strong domestic financial performance, high demand and good margins on international flights, to North America and on the Tasman, in particular, underpin a spectacular reversal of fortune for Air New Zealand. After suffering its worst six-month losses during the pandemic in its 82-year history, it has swung back into profit and on track to enjoy its fourth best half-year.
Taxpayers have backed the airline with more than $2 billion of direct and indirect support during the pandemic and more good news is one analyst forecasting it may be paying dividends to shareholders sooner than an earlier projection of 2027.
Illustration / Rod Emmerson
Uncertainty hovers over aviation but the prospect of payouts is great news.
The Government as the majority owner has set Air New Zealand a balancing act. It is charged with being commercially sustainable and also maintaining a comprehensive domestic route network that allows people and goods to move around the country in a timely fashion at a "reasonable cost".
Those in regional centres, particularly, have little choice but to use the national carrier if they need to fly.
The airline points out that domestic fares were increased due to surging fuel prices, higher wages and supplier costs. These are not going to fall fast.
But all Kiwis – who have invested heavily in Air New Zealand throughout the pandemic - are facing the same cost pressures.
