Is Air New Zealand crapping on New Zealand?

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#1981480 22-Mar-2018 13:49

vexxxboy:

sorry but it is all about profit , it has to make a profit to fulfill it's obligations to the government .

Same obligations as to its other 49% shareholders - make a return on their investment. But they have non financial obligations in their corporate mission - stuff like not killing passengers etc.

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kryptonjohn

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#1981482 22-Mar-2018 13:50

Sideface:

Rikkitic:

... Until recently, the one-hour flight to Auckland cost nearly as much as flying to Sydney.

Recently was when Jetstar brought in a competing service, and now we have occasional $69 flights to Wellington during the week, although Air NZ (and Jetstar) still rips us off on weekends. ...

The last time that I flew by Air NZ Napier - Auckland return (on a week day) the same-day return fare was $800.

That is price gouging by any definition.

Then fly Jetstar?

vexxxboy

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#1981483 22-Mar-2018 13:52

kryptonjohn:

vexxxboy:

sorry but it is all about profit , it has to make a profit to fulfill it's obligations to the government .

Same obligations as to its other 49% shareholders - make a return on their investment. But they have non financial obligations in their corporate mission - stuff like not killing passengers etc.

https://thespinoff.co.nz/politics/22-03-2018/does-shane-jones-want-air-new-zealand-to-break-the-law/

Common sense is not as common as you think.

kryptonjohn

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#1981484 22-Mar-2018 13:53

MikeAqua:

Linux:

@Sideface booked a ticket last night NPE - AKL $39 on Jetstar weekday

But will you get there? That's the punt with JetStar.

I go there a couple of times a year, never been a problem with Jetstar. Like AirNZ if there's no viz you won't be going regardless of airline.

openmedia

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#1981485 22-Mar-2018 13:53

MikeAqua:

I gotten used to paying more for regional flights. What really annoys me is the lower standard of food service in regional koru lounges at the main airports. Pay more. Get less. First world problem but it irritates me.

I flew out of Queenstown yesterday and the Koru there is far better than Auckland or Welligton's domestic Koro.

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Rikkitic

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#1981537 22-Mar-2018 14:27

I don’t agree with the argument that companies are in business only for profit and only have a duty to their shareholders. Companies are part of the community they operate in, and they enjoy a wide range of benefits from that community, both direct and indirect. Enlightened companies acknowledge this and make an effort to give back to their communities, even if that doesn’t provide an immediate financial return. I’m not sure if laying on an all-expenses paid golf trip for a very well-off former president qualifies.

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vexxxboy

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#1981539 22-Mar-2018 14:30

Rikkitic:

I don’t agree with the argument that companies are in business only for profit and only have a duty to their shareholders. Companies are part of the community they operate in, and they enjoy a wide range of benefits from that community, both direct and indirect. Enlightened companies acknowledge this and make an effort to give back to their communities, even if that doesn’t provide an immediate financial return. I’m not sure if laying on an all-expenses paid golf trip for a very well-off former president qualifies.

not when the majority of the shareholders live outside NZ , they are in it to make money.

Common sense is not as common as you think.

Rikkitic

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#1981544 22-Mar-2018 14:37

JimmyH:

Thirdly, your post isn't internally consistent. It's not rational to accuse them of gouging (which I understand to mean making excessive profits by pricing on regional routes at a level much higher than reasonable or fair given costs of provision etc) and to slam them for closing regional routes because they are losing money on them. They can either be making excessive profits on a route (in which case they will presumably continue to operate on it) or losing money on a route (in which case they will presumably close it). They can't simultaneously be doing both.

Fourthly, it's not accurate to accuse the Company of having no "sense of obligation to the taxpayers who once rescued it from bankruptcy". It does have an obligation to taxpayers, and others who have invested in it, namely to reward them by making them a good return on their investment.

I didn't feel I was being inconsistent. What I said was that after squeezing the routes dry for all they could get, Air NZ unceremoniously cast them aside. That may or may not be true, but it isn't inconsistent with my argument.

If Air NZ has an obligation to investor taxpayers (it does), then the way to meet that obligation is not to overcharge them so it can give them their own money back. The argument is that Air NZ is milking its profitable domestic routes to subsidise lower fares on its international ones. At the same time, by dropping the insufficiently profitable domestic routes it is crapping on its customers who have no other equivalent alternative.

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Rikkitic

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#1981548 22-Mar-2018 14:41

kryptonjohn:

Then fly Jetstar?

I did fly Jetstar most recently. Great service, very nice people, good price, no problems. But they gouge on weekends just like Air NZ. So I came back on the bus.

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ockel

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#1981575 22-Mar-2018 14:43

Rikkitic:

I don’t agree with the argument that companies are in business only for profit and only have a duty to their shareholders. Companies are part of the community they operate in, and they enjoy a wide range of benefits from that community, both direct and indirect. Enlightened companies acknowledge this and make an effort to give back to their communities, even if that doesn’t provide an immediate financial return. I’m not sure if laying on an all-expenses paid golf trip for a very well-off former president qualifies.

AirNZ is a publicly listed company and has an obligation to its shareholders such that its profit meets or exceeds its cost of capital. How it chooses to do this is a matter for the board and its executives to determine. A marketing exercise using a high profile person that promotes international travel using AirNZ is not a benefit to anyone - its a marketing cost but thats irrelevant to the issues you raise.

For an airline its a pretty simple concept to understand the relationship between Revenue Passenger Kilometres (RPK's) and Available Seat Kilometres (ASK's). If a route doesnt meet the required yield (RPK's/ASK's) to cover direct costs, common costs and required margin to meet the required rate of return then the route is not economically viable.

Now the key questions here are:

- should a route be economically viable on its own point to point basis?

- should sub economic routes be subsidised by more profitable routes (knowing that competitors will look to compete those profits away - and make the more routes collectively unviable)

- should domestic routes be subsidised by international routes (or cargo etc etc) knowing that competitors will look to compete those profits away et al

- should capacity move from unprofitable routes to more profitable ones to meet demand (especially where RPKs>ASKs)?

Arguably the question of subsidies in transport occurs all the time. Should Kiwirail operate (or be forced to open) non-viable spurs? Should ratepayers (and you'll note that these are not bus/rail operators shareholders) be subsidising public transport? To what extent? Should taxpayers either directly or indirectly be subsidising a non-viable service out of Kapiti? Should the local council tender for a chartered daily service from AKL to PPO - and fund the subsidy from local rates (as it benefits the local area not the nation)?

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kryptonjohn

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#1981576 22-Mar-2018 14:43

Rikkitic:

I don’t agree with the argument that companies are in business only for profit and only have a duty to their shareholders. Companies are part of the community they operate in, and they enjoy a wide range of benefits from that community, both direct and indirect. Enlightened companies acknowledge this and make an effort to give back to their communities, even if that doesn’t provide an immediate financial return. I’m not sure if laying on an all-expenses paid golf trip for a very well-off former president qualifies.

The company's goals and mission statement are up to the company to decide for itself as directed by the board and ultimately its shareholders.

As long as they are operating legally and not causing harm (and removing a service doesn't constitute harm in this context) then non-shareholders have no reason to stick their noses into what is literally none of their business.

At the end of the day, companies only exist because shareholders saw fit to put their *own* money into them.

Being nice to the community may or may not be of interest to the shareholders. Nobody but them gets a say on that.

Now, the NZ public, through the government, are 51% shareholders so do have a say, but not at an operational level. They can tell the board to change their ways, but even then, the directors are required by law to act in the best interests of the company - not the shareholders This was explained earlier in this thread: https://thespinoff.co.nz/politics/22-03-2018/does-shane-jones-want-air-new-zealand-to-break-the-law/

kryptonjohn

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#1981578 22-Mar-2018 14:44

vexxxboy:

Rikkitic:

I don’t agree with the argument that companies are in business only for profit and only have a duty to their shareholders. Companies are part of the community they operate in, and they enjoy a wide range of benefits from that community, both direct and indirect. Enlightened companies acknowledge this and make an effort to give back to their communities, even if that doesn’t provide an immediate financial return. I’m not sure if laying on an all-expenses paid golf trip for a very well-off former president qualifies.

not when the majority of the shareholders live outside NZ , they are in it to make money.

51% government owned, and presumably a chunk of the other 49% is owned by NZ shareholders, Kiwsaver funds etc.

But all of them are expecting a return on investment wherever they live.

stinger

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#1981579 22-Mar-2018 14:44

Rikkitic:

The argument is that Air NZ is milking its profitable domestic routes to subsidise lower fares on its international ones. At the same time, by dropping the insufficiently profitable domestic routes it is crapping on its customers who have no other equivalent alternative.

This happens in every industry. Telecom used to charge customers more if they weren't in an area covered by the TelstraClear HFC network. Petrol companies mysterious charge more the minute you get south of Levin (e.g. Wellington and the South Island) where Gull and the other cheaper petrol companies aren't.

MikeB4

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#1981582 22-Mar-2018 14:44

Rikkitic:

kryptonjohn:

Then fly Jetstar?

I did fly Jetstar most recently. Great service, very nice people, good price, no problems. But they gouge on weekends just like Air NZ. So I came back on the bus.

It's NOT gouging to charge more in off peek times and emptier seating. It cost $x to fly from point A to point B, these flights are not charity runs they have to at least cover operating costs or better make a profit.

Rikkitic

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#1981587 22-Mar-2018 14:52

$280 for a one-hour domestic flight is actually more than I paid to go to Sydney. This is not a fair return. It is charging all the market will bear. Gouging, in other words.

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