$3 per kilometre to fly: Are New Zealanders getting value from domestic air travel?

Brian from Mount Roskill

Short-hop domestic flights are costing New Zealanders as much as $3 a kilometre if they are booked shortly before travel - and that has prompted calls for change.
RNZ and economist Benje Patterson looked at the price of a range of domestic flights, both booked a week out and booked at the end of February.
We found that someone who was planning to travel in the last week of February next year could pay anything from 12c per kilometre for a flight from Auckland to Christchurch on Air New Zealand - or 8c on Jetstar - through to $1.07 a kilometre flying from Wellington to Blenheim.
Flights to Queenstown were 14c and 9c on Air New Zealand and Jetstar respectively and a flight between Hamilton and Christchurch was about the same.
Wellington to Nelson was 66c and Whangārei to Auckland 55c.
For last-minute flights, booked last week for travel this week, Auckland to Christchurch was still relatively affordable - 18c per kilometre on the cheapest flight on the most expensive day on Air New Zealand and 28c on Jetstar.
But Whangārei to Auckland was $1.43 a kilometre, Wellington to Nelson $1.44, Hokitika to Christchurch $2.02 and Wellington to Blenheim $3.04.
Patterson said it showed that booking in advance offered the cheapest flights on main trunk routes.
"With head-to-head competition between Air NZ and Jetstar…Jetstar's lead-in pricing appears to be $0.10 or lower per kilometre on its main trunk routes, while Air NZ has lead-in pricing of 12c to 18c per km.
"The only exception for main trunk routes is Wellington to Dunedin, which appears relatively expensive for both airlines. When it comes to last minute flights, neither airline is particular cheap on main trunk routes. The prices are often 30c to 80c per km. Interestingly, Air New Zealand appears slightly cheaper last minute."
He said regional flights where there was no competition were significantly more expensive.
"Even booking a long time out, flights in February for Air NZ tend to fall into two pricing groups - those that are 20c to 30c per km, and those that are 50c-plus per km. The regional flights that are more expensive per kilometre tend to be short hops - like Whangārei to Auckland, and Hokitika to Christchurch - those ones stand out as interesting as you can drive them relatively quickly.
"Other relatively expensive regional flights like Nelson to Wellington and Blenheim to Wellington are still a compelling option to many as driving takes significantly longer once ferry connections are taken into consideration so the flight is more reasonable in that context."
Air New Zealand general manager for domestic Kate O'Brien said the airline was aware of how important air travel was and tried to keep fares as low as it could.
"Running an airline comes with a lot of cost, unfortunately. Across our network, we spend more than $3 million every day on fuel, and that's before we consider the cost of the aircraft themselves, airport and air navigation charges, engineering and maintenance, and of course paying our pilots, crew and wider team.
"The costs per seat of operating smaller aircraft are considerably higher than those of larger aircraft due to scale diseconomies. To put it simply, there are fewer seats to spread the costs over. Baseline costs such as engineering and maintenance, aviation charges including landing fees, and fuel are also spread over fewer kilometres. Many of these costs over the past few years have increased significantly.
"Our smaller aircraft also operate with more crew per passenger than larger aircraft, and the aircraft operate more cycles - take-off and landings - so have higher maintenance requirements."
She said the airline's domestic costs has gone up 40 percent since 2019 while fares had risen 35 percent.
"Landing charges and passenger levies are up 43 percent since 2019, and by the end of our 2026 financial year we expect them to be 76 percent higher than in 2019. As an example, on a one-way ticket from Auckland to Wellington, we pay $60.62 in fees before the aircraft even leaves the ground. In 2019, this was $33 one way in fees."
She said the airline used a supply and demand-based system with a range of price points.
"This helps make sure that we have seats available when people need them, including last minute.
"Our flights go on sale about 12 months in advance - booking early almost always offers the best chance of securing a lower fare. While there might be a good deal close to the departure date or time, it will generally be where demand for the destination or the time of day isn't high. For popular places, dates and times, booking early is how we recommend passengers get the best fare.
"We know that it isn't always possible, but if people have flexible travel plans, flying on less popular days, during off-peak times, or changing travel by a day can help with a lower fare."
Consumer NZ investigative writer Vanessa Pratley said meaningful competition on more routes would help to drive down prices.
"We welcome the government's aviation action plan which looks to investigate how funding could be applied to enable expansion and increased resilience for smaller regional airlines.
"Everyone in Aotearoa deserves to be connected. Having access to fair and affordable transport is crucial to that. Maintaining these regional routes is important, and we recognise it can be expensive to fly them. That's why we're pleased to see the government's aviation action plan directly addresses this issue using the Regional Infrastructure Fund."
Patterson said it had been intriguing to see people saying publicly they would rather that lead-in airfares were slightly more expensive, rather than being set so low, if that meant the last minute flight prices were not as pricey.
"It is crazy to me that people on the same flight can pay five or six times what others who booked early paid, and both airlines are guilty of this. Could you build your social license by charging slightly more on lead-in flights so as to not gauge so much on last minute? Last minute is what catches people's emotion, and is arguably where people are a little more vulnerable if the flying is through to some unexpected circumstance or crisis they are dealing with."
Pratley said there were a range of ways pricing could be made fairer or passengers.
"We'd like to see more transparent pricing generally, particularly around how dynamic pricing algorithms are used."
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