Key says Kiwis, tourists will benefit from Jetstar flying regional routes

Thursday 18th June 2015

Prime Minister John Key said regional New Zealanders will be cheering wildly at the news Jetstar will expand from flying main trunk routes into regional ones by the end of the year, ending Air New Zealand’s stranglehold on the domestic market.

The move is expected to see a significant fall in fares, although Jetstar has yet to confirm how low prices will go.

Key, who also holds the tourism portfolio, said the government doesn’t favour one airline over another.

“We love competition as a government because it delivers better prices to New Zealand. On the trans Tasman route we have seen lots of capacity, low prices, lots of competition, plenty of deals and happy consumers,” he said.

Qantas Airways chief executive Alan Joyce said typically fares dropped 40 percent in New Zealand when Jetstar, Qantas’s budget offshoot, began flying the main trunk routes and he’d expect a similar impact this time round.

“The community has been calling out for more choice and lower fares on regional routes in New Zealand because there’s a lack of competition,” Joyce said.

New Zealand’s strong economy and tourism growth had convinced the airline the timing was now right to launch into the regions, he said.

Fares will go on sale in September when Jetstar will confirm which of seven prospective destinations it will fly to. Options include Hamilton, Rotorua, Napier, New Plymouth, Palmerston North, Nelson and Invercargill.

Joyce said he expected the airline to be flying to at least four destinations by the new year.

Air New Zealand shares dropped to their lowest level since November in the lead up to the announcement, and were recently down 8.3 percent to $2.43.

The move should come as no surprise to the national airline, which has seen increased demand and profitability on the regional routes in the past two years. It suffered a consumer backlash after pulling out of operating services to three of its smaller unprofitable destinations, Kaitaia, Whakatane, and Westport, from April. Jetstar has no plans to fly those routes either.

Jetstar CEO Jayne Hrdlicka said the final choice on the destinations rests on the partnerships the airline is able to make with local councils, airports and communities. “It will come down to getting the right slots, at the right times, and at the right prices,” she said.

Hrdlicka said there was pent up demand in New Zealand for a low cost service with Jetstar having received some 10,000 'posts' from Kiwis in the past two years asking it to start flying into regional New Zealand.

It was about growing the pie and maintaining profitability for both airlines rather than fighting each other for market share, she said.

The Jetstar group has only just returned to profitability in its latest six monthly result, reporting underlying earnings before interest and tax of A$81 million for six months ended Dec. 31 2014, from a A$16 million loss in the previous corresponding period.

Joyce said Jetstar believed it could fly in the regional routes profitably even though other airlines have struggled to do so over the years. People said Qantas wouldn’t make it work when it started up Jetstar in 2003, or when it started flying the trans Tasman in 2005, and when it started flying domestic routes in New Zealand in 2009, he said.

“We’ve proved them wrong every single time,” he said.

Jetstar employs 400 people in New Zealand and is hiring is underway for a further 100 to service the new routes.

Currently it uses nine Airbus A320 jets to fly to Auckland, Wellington, Christchurch, Dunedin, and Queenstown. The regional routes will be serviced by five Bombadier Q300 turboprop aircraft which seat 50 passengers. Joyce said the average age of the planes which have been flying regional services in Australia was around 10 years which was half their expected life.

Auckland Airport CEO Adrian Littlewood welcomed the announcement which he said would benefit travellers flying regionally.

“The addition of Jetstar to the regional market is great news for travellers as it means more seats, better prices, and increased connectivity on regional services. This will not only benefit people living in the regions, but also kiwis and international travellers wanting to visit the regions.”

Littlewood said increased air connectivity was critical to reaching the targets outlined in the NZ Tourism Industry Association’s 2025 strategy.

Christchurch Airport CEO Malcolm Johns shared the same view, saying he was looking forward to working with Jetstar on this initiative which would enable visitors to get off the main trunk line more easily.

BusinessDesk.co.nz

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