Monday 29th February 2016
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Promoters of the Wellington airport runway extension are mistaken to expect that building it will be enough to attract airlines to establish new long-haul routes to the capital, says an international airline expert brought to New Zealand by one of the project's biggest critics, Air New Zealand.
Montie Brewer, a former chief executive of Air Canada who sits on the boards of Irish airline Aer Lingus and Swiss International Airlines, said New Zealand is risky for global carriers because of its distance from major long-haul destinations. They would be more likely to increase service frequency and plane sizes through established routes into Auckland before looking even to Christchurch, let alone Wellington, he said.
"I'm not a Yank coming down here to tell you it's a dumb idea," he told BusinessDesk but warned there was a high risk that "no one's going to use that runway", meaning existing users would end up paying for it, risking higher airfares.
"If you're trying to build this to entice a planner to decide to fly here, you would probably do best to talk to some planners first."
Owned 66/33 by NZX-listed infrastructure investor Infratil and Wellington City Council, Wellington International Airport is pursuing the majority of funding for the $300 million project from the council and central government and is working on a business case to demonstrate it would pay for itself through increased economic activity.
While modelling undertaken for WIAL by global air route consultancy INTERVistas used "the right process", the rates of passenger growth it projected were "quite low" and unattractive compared to other global opportunities, said Brewer.
"When you look at the list (of possible new services), New Zealand doesn't come up on that list very well," he said. It tended to be a leisure rather than a business traveller's market, so potential customers were more focused on price than convenience and there was a limited domestic outbound market compared to alternatives.
"I might think I need to have New Zealand in my portfolio, but not in the same way as London, Tokyo or Paris. It's not like my customers are complaining about not being able to connect through Christchurch. That's not my customer. That's Air New Zealand's problem."
He praised Wellington airport success for its new service to Singapore via Canberra, which he said Air New Zealand wouldn't like because airfares to Singapore would fall, but the Singapore Airlines service starting on Sept. 1 was being achieved without the runway extension.
"You can fly wide-bodied jets across the Tasman already," he said. Globally, airline economics meant that "if you are in any non-hub city, competition is via different gateways."
An international carrier would "creep up" on services to New Zealand and would most likely target Auckland first, as a known quantity with plenty of competing short haul carriers able to take its passengers to onward locations, at first using "the smallest possible airplane", such as a Boeing 787 Dreamliner.
"If there's more demand to come down here, they'll put on a 777, then a 777-300. They can handle all the demand into New Zealand for the next five to 15 years by up-gauging their current aircraft."
If bookings from one gateway in their home country were strong, the next likely move would be to fly to Auckland from a second gateway rather than targeting a second New Zealand destination, which could harm the profitability of existing services to Auckland. At that point, it would also consider whether other routes altogether were more attractive.
"I'm thinking about Athens, Denver, wherever. You're competing with the whole rest of the world."
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