Jetstar pulling out of most regional routes in New Zealand

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surfisup1000

5288 posts

Uber Geek

#2324785 25-Sep-2019 19:31

Shane Jones undue pressure on Air NZ to lower regional pricing, must have contributed to Jetstar withdrawing .

So the champion of the regions is now looking more like the chump of the regions!

Typical unforeseen consequences when politicians think they know more than everyone else!

nickb800

2715 posts

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Trusted

#2324797 25-Sep-2019 19:48

smcc:
So where was the commerce commission when they approved the code-sharing relationship between Qantas and ANZ on the basis that it would not impact competition. Not that that may have made a difference, but it is fortuitous timing that Qantas owned Jetstar pulls out of competition with ANZ now that Qantas is selling codeshare tickets on ANZ operated flights.

While the codeshare agreement might have dented Jetstar's passenger numbers on the trunk routes, it's unlikely to have had any material effect on Jetstar's regional numbers. E.g. on a flight from Wellington to Nelson - the proportion of the passengers coming through from Sydney would be tiny.

And why would Qantas enter a deal for a few codeshare routes if it was going to torpedo their own subsidiary?

smcc

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#2324815 25-Sep-2019 20:11

nickb800:
smcc:

So where was the commerce commission when they approved the code-sharing relationship between Qantas and ANZ on the basis that it would not impact competition. Not that that may have made a difference, but it is fortuitous timing that Qantas owned Jetstar pulls out of competition with ANZ now that Qantas is selling codeshare tickets on ANZ operated flights.

While the codeshare agreement might have dented Jetstar's passenger numbers on the trunk routes, it's unlikely to have had any material effect on Jetstar's regional numbers. E.g. on a flight from Wellington to Nelson - the proportion of the passengers coming through from Sydney would be tiny.

And why would Qantas enter a deal for a few codeshare routes if it was going to torpedo their own subsidiary?

With very thin margins it would make a difference to potential profitability.

Why would Qantas want to torpedo they subsidiary? Because the increased losses give them an excuse to stop services, and they will make more by reselling ANZ seats on services where they don't incur the operating costs.

All this is their right and sensible business, but the CC is meant to protect competition so as the consumer is not disadvantaged, I'm not convinced this has happened as it should. I'm sure ANZ is aware of this also hence their announcement around price restraint.

boosacnoodle

963 posts

Ultimate Geek

#2324828 25-Sep-2019 20:35

Nate001:

But prices last few years have hardly been competitive to Air NZ combined with only 4 flights a day the times never worked.

Jetstar have said "Last year 25 per cent of our regional customers paid less than $50 for their flight and 75 per cent paid under $100". That to me seems unsustainable & not at all expensive, given only 25% of your customers are paying over $100. From my side of the country (South Island) having to connect via. Auckland to go anywhere was never going to work. A trip to Palmerston North for instance would take 7 hour and cost more than Air NZ more often than not. It was a non-starter for anyone not living in the North Island.

jarledb:

Not been impressed with Jetstar flying from Wellington to Auckland. They seemed to have a very relaxed view on departure times. Almost lost us the connection last time we flew with them.

Was happy they started flying to Napier when we lived there, because the Air NZ prices dropped pretty significantly.

Jetstar's on-time performance for some time has been demonstrably above that of Air NZ. Of course, now they are gone again expect prices to rise. People are happy to bash Jetstar, but surely do not complain when the price of Air NZ's flights go down due to this competition.

surfisup1000

5288 posts

Uber Geek

#2324857 25-Sep-2019 20:57

boosacnoodle:

Jetstar's on-time performance for some time has been demonstrably above that of Air NZ. Of course, now they are gone again expect prices to rise. People are happy to bash Jetstar, but surely do not complain when the price of Air NZ's flights go down due to this competition.

NPR Money did an investigative podcast on budget airlines - the conclusion is that people hate budget airlines, but they still use them as their preferred option. ie, price trumps service.

I like Jetstars strict check-in deadlines -- I've usually had pretty good experiences with their flights being on time.

allio

885 posts

Ultimate Geek

#2325104 26-Sep-2019 10:12

boosacnoodle:

Jetstar's on-time performance for some time has been demonstrably above that of Air NZ. Of course, now they are gone again expect prices to rise. People are happy to bash Jetstar, but surely do not complain when the price of Air NZ's flights go down due to this competition.

Yup. The people saying "won't make any difference to me, it was barely any cheaper than Air NZ anyway" don't realise that Air NZ was only that cheap because of Jetstar. Watch the prices rise now.

gmball

568 posts

Ultimate Geek

#2325115 26-Sep-2019 10:27

allio:

boosacnoodle:

Jetstar's on-time performance for some time has been demonstrably above that of Air NZ. Of course, now they are gone again expect prices to rise. People are happy to bash Jetstar, but surely do not complain when the price of Air NZ's flights go down due to this competition.

Yup. The people saying "won't make any difference to me, it was barely any cheaper than Air NZ anyway" don't realise that Air NZ was only that cheap because of Jetstar. Watch the prices rise now.

If Jetstar were able to lose $20 million each year on regional routes, their prices were unsustainable, so I'd be shocked if Air NZ didn't increase their prices, and fair enough. They aren't a charity and I see no reason why those choosing to live in the regions with cheaper housing should expect others to subsidise their travel.

I travelled recently in the USA, and a 3 hour domestic flight cost $861 NZD, that's $287 per hour, so I honestly don't think our fares here are unreasonable, I think the expectations of Kiwis are unreasonable.

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sbiddle

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#2325301 26-Sep-2019 13:28

gmball:

If Jetstar were able to lose $20 million each year on regional routes, their prices were unsustainable, so I'd be shocked if Air NZ didn't increase their prices, and fair enough. They aren't a charity and I see no reason why those choosing to live in the regions with cheaper housing should expect others to subsidise their travel.

I travelled recently in the USA, and a 3 hour domestic flight cost $861 NZD, that's $287 per hour, so I honestly don't think our fares here are unreasonable, I think the expectations of Kiwis are unreasonable.

I'm really curious why you think Air NZ would need to increase prices. I've always said JQ were not competition for Air NZ, and certainly Air NZ's pricing policy reflects the fact they couldn't care less about what JQ did in the market. I see zero reason for Air NZ to increase prices because of JQ pulling out.

People love to moan about airfare prices and 99% of those who moan about the prices would have zero idea how much running an airline costs. Prices in other countries (the US in particular) can be significantly higher than prices in NZ, and even if you look at Aussie if you're really lucky you'll pick up airfares betwen Melbourne and Sydney for under A$150, that's over 3x the price of the cheapest entry level fares on Wellington-Auckland or Christchurch-Auckland routes.

I see one of the issues in NZ is that our entry level pricing is cheaper meaning their is a wider price difference when it comes to fares, and on Wellington to Auckland as an example pricing ranges between $49 and around $359. People think because a seat can sell for $49 that every seat should be $49 which totally ignores the fact the entry level fares on many routes are loss making.

surfisup1000

5288 posts

Uber Geek

#2326266 28-Sep-2019 09:13

sbiddle:

I'm really curious why you think Air NZ would need to increase prices. I've always said JQ were not competition for Air NZ, and certainly Air NZ's pricing policy reflects the fact they couldn't care less about what JQ did in the market. I see zero reason for Air NZ to increase prices because of JQ pulling out.

Prices are often higher in a monopoly market.

To claim Air NZ doesn't care about a competitors pricing is unrealistic in my view.

Although, it is not a straight forward scenario as the government appears rather interested in Air NZ pricing too.

I bet Air NZ would also like to pull out of some of the less profitable routes.

sbiddle

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#2326285 28-Sep-2019 10:41

surfisup1000:

sbiddle:

I'm really curious why you think Air NZ would need to increase prices. I've always said JQ were not competition for Air NZ, and certainly Air NZ's pricing policy reflects the fact they couldn't care less about what JQ did in the market. I see zero reason for Air NZ to increase prices because of JQ pulling out.

Prices are often higher in a monopoly market.

To claim Air NZ doesn't care about a competitors pricing is unrealistic in my view.

Although, it is not a straight forward scenario as the government appears rather interested in Air NZ pricing too.

I bet Air NZ would also like to pull out of some of the less profitable routes.

Air NZ don't care about JQ pricing - if they did they would attempt to price match it but the simple reality is they couldn't care less which is why they're happy to sell tickets even on main trunk jet flights for 3x the price of JQ - there is quite simply no real need to attempt to compete with them.

The simple fact is flying planes around isn't cheap. And you only need to look at raw data to realise how much it really does cost - Air NZ flew 17.73 million passengers last year and delivered an after tax profit of $270 million - which means an average $ profit per passenger of $15.22 which is peanuts in the grand scheme of things.

It is well known that JQ as a whole in NZ isn't profitable, obviously getting rid of the heavy loss making regional will help that, but they're going to need to do something to try and improve their business.

I'm sure Air NZ would love to pull out of some regional routes they don't make any money on even with the current pricing which many people living in those regions would consider excessive, but would struggle to do so with the current government.

GGJohnstone

86 posts

Master Geek

#2326622 29-Sep-2019 11:25

Ticket prices might be at the maximum already.

Back in history roads were much more difficult the demand for air travel was much greater. For a long time the flights were arranged in a self healing ring from Hokitika to North and East. You or your air mail might still get away when Christchurch was fog bound. Geographic factors played a significant part in the need for air travel so much so that it can be argued that the first New Zealand commercial air service was centered on Hokitika.

Already costs have ruled out most advantages of air travel from Hokitika. No longer are the services appreciated as a feeder for forward travel. The liability of connecting flights adds dramatically to a ticket price. It might not take long for Air New Zealand to fade away from here if support from B O S falls off. Some price increases will leave the company credit card traveler and government departments but that is unlikely to have an over all positive effect. The availability of aircraft at the time of day to give in and out service to those corporate types was almost lost at last rehash of services mainly cause by larger aircraft types.

So let them try increasing the cost of HKK CHC. I imagine that will have the availability of service between other destinations increasing as any air travel in and out of Hokitika stops and the bean counters will say if can't be any other way.

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