Airlines Welcome Examination Of The Impact Of Airport Costs On Demand And Seat Capacity

Auckland, 14 March 2024 - Board of Airline Representatives (BARNZ) says airlines welcome the examination of the impact of airport costs on demand and seat capacity.

“NZ Airports Association (NZAA) states New Zealand is one of the least competitive airline markets, and that there’s been no government policy work to correct this. In fact, New Zealand is probably one of the most expansive ‘open skies’ environments I know of. The New Zealand government has for many years offered open air services arrangements with other states,” says Cath O’Brien, Executive Director of BARNZ.

Open skies air services agreements encourage competition, O’Brien says. “For example, the government policy settings between New Zealand and Australia allow for any Australian airline to operate here domestically without limitation.”

O’Brien says airlines do not want to see higher fares, but these are an unfortunate consequence of constrained supply of seats and high operating costs (including airport charges) in the New Zealand market.

“What we see in New Zealand domestically at the moment is a lack of seat capacity. This comes about because New Zealand is a small market with expensive and rising operating costs. Fewer seats lead to higher prices, higher costs lead to fewer people travelling, which leads to fewer seats…. it can become a downward spiral.

“We’ve seen domestic competitors to New Zealand reduce services over the years – this is because there are better markets for those aircraft elsewhere.”

O’Brien adds with Auckland Airport (AIAL) prices as currently set; and these costs impact demand for travel, ticket prices could rise further.

“Domestic airlines cannot afford the extremely expensive airport AIAL is setting out to build. Costs imposed by Auckland Airport will push up the price of travel permanently for Kiwis and this will be felt most by domestic and Tasman travellers – the flights we take most often.”

”If NZAA and its members are concerned about higher pricing for domestic airfares, we suggest AIAL considers reducing prices for what is one of the largest costs to domestic and Tasman operators beyond fuel – airport infrastructure.”

“Airlines welcome examination of airport costs and the impact of these costs on demand and seat capacity. Airlines have asked the Commerce Commission to include this assessment in its current review of AIAL’s steeply rising prices.”

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