Jim Eagles: World is in our reach

COMMENT

It's now cheaper for New Zealanders to travel overseas than it has ever been. And that's official.

The Consumer Price Index has for nearly 20 years included an International Air Travel Index, recording trends in air fares.

When Statistics New Zealand started the index in September 1985 it was at 1158. The latest index, as at December last year, was 933. And that is before the latest round of fare-slashing.

How many services can you think of which have fallen in price by 19 per cent in the past 18 years and are still falling?

In fact, the real fall in air fares is much greater than that. If you adjust for increases in wages and salaries since 1989 - which is as far back as the earnings data go - the cost of international air travel has fallen by 37 per cent in real terms. Or, to put it another way, 20 years ago it probably cost the average person seven or eight days' wages to pay for a return ticket to Australia. Now the same trip costs more like two or three days' wages.

Part of the credit for that is due to the rise in the value of the New Zealand dollar (or, to be more accurate, the decline of the United States dollar). But mostly it's thanks to the advent of real competition between airlines.

Instead of joining forces in a cosy duopoly our two main airlines, Qantas and Air New Zealand, are now starting to slug it out. Both are cutting prices - Air New Zealand has virtually transformed itself into a value-based airline - and each now has a budget subsidiary.

More airlines are flying into New Zealand and many of them are offering specials to attract passengers. Pacific Blue, a true cut-price airline, has been operating in Australia for a while and is now flying across the Tasman. And Flight Centre, the country's largest travel retailer, added to the excitement for a time with a plan to offer its own super-cheap flights to Fiji.

With all the competition prices have, predictably, been plummeting.

Newcomer Pacific Blue has an introductory offer of one-way transtasman flights for $99 (plus taxes) and Air New Zealand has come close to matching it. A year ago the basic return fare was $529.

Air New Zealand's latest move is the introduction of Pacific Express which, from May 20, will see fares to the Cook Islands, Fiji, Samoa and Tonga drop by an average 54 per cent. Other airlines will have to match that or lose business.

All of that is opening up the world to New Zealand travellers like never before.

Travel industry veterans can hardly believe what they're seeing.

Susie Cassels-Brown, one of Flight Centre's most senior travel agents, says the cost of flying the Tasman or to Europe has effectively halved in the past decade.

"Ten to 15 years ago the transtasman air fare was $649 or $749. That was it.

"You had no choice. You either flew Qantas or Air New Zealand and they code-shared. It was a total monopoly. Now you can fly transtasman for half that.

"In those days it also cost close to $4000 to fly to Europe. Now you can get a return flight for under $2000. Fares are truckloads cheaper."

And why is that? Cassels-Brown has no doubt. "It's thanks to competition."

House of Travel's Merilynn Crean, who has been in the travel industry for 38 years, feels the same way.

"Previously you didn't have a choice in anything," she recalls. "There was one fare and that was it. And it was very expensive.

"All the fares were set by governments and the airlines ruled the roost."

Now, she says, all that has changed. "The rules have been loosened, there's much more competition and the airlines have been forced to adapt.

"There's so many choices, so many different prices and so many specials that it's a wonderful time to travel."

Crean is particularly pleased at the dramatic reduction in fares to the Pacific Islands.

"I've always thought they were ridiculously expensive but now they've halved overnight.

"It opens up so many more options for family holidays and it's got to be good for the islands as well."

In fact it is good for pretty well everyone but the airlines, not all of which will survive the price war.

But then the aviation industry has long been a bizarre shambles of cartels and monopolies, heavily protected national carriers, subsidies, restricted landing rights, gross overcapacity, huge egos, perennial loss-makers and artificial prices.

All of that may have been great for populist politicians and ambitious airline executives. But it has rarely been good for consumers.

It's about time the tables were turned and a bit of genuine competition allowed so that consumers can be the winners for a change. We should enjoy the low airfares while they last.

Better still, we should reject any plans to return to the age of aviation cartels and monopolies, so the low fares do last.