The troubles with regional air services hark back to reforms which fuelled rising charges

The analysts and number-crunchers are hard at work at the Ministry of Transport trying to figure out what’s wrong with NZ’s regional air services.  The answer isn’t too hard to find.

It begins with the economic revolution of the 1980s and the Lange Labour Government.  The deregulation of air services launched by his transport minister Richard Prebble brought  gains on the main trunk routes (Auckland-Wellington-Christchurch and possibly Dunedin).

Ansett New Zealand, backed by the  empires of News Corporation and TNT, vastly improved those services with upper-class services and frequent flier lounges. In those heady days Ansett NZ’s “Chairman’s” lounges were packed with ministers, MPs and captains of industry. All at great cost, but Ansett was looking to integrate its Australian and NZ networks, which proved to be a bridge too far.

There was a similar and less-appreciated revolution under way in regional NZ. Till then, airports were joint ventures between the local authority and the Crown, administered by the Ministry of Transport.  All were meant to be public utilities, offering a modicum of comfort for passengers, at reasonable cost to the airlines (in effect National Airways Corporation, then Air NZ from 1978).

But the great revolution turned these into cost bases when the local body was encouraged to wring the best possible return for their “investment”, which actually had been made years earlier.  Inevitably, landing charges were increased.

Then, over the last 30 years, Air NZ moved away from the airliners best suited to those regional routes –  aircraft with up to 40 seats.  The 60-seat ATR72 became the norm.

There is a legend, probably true, about the circumstances in which the ATR was ordered. It goes back to the days of Mount Cook Airlines (absorbed by NAC)  when the company had to replace its sturdy Hawker Siddeley 748s.

Operations manager Captain John Jones surveyed the industry and concluded that the ATR might fit the bill, although a little bigger – but as a European airframe it was unlikely to be supported by owners Air NZ, then deeply embedded with Mr Boeing and Mr McDonnell Douglas, and unlikely to be approved.

Surprisingly, his proposal was accepted.

To fit the bottom end of the market, Air NZ’s regional markets had the Brazilian Embraer Bandeirante and the Beech 1990, which many critics reckoned was the most unattractive aeroplane in the sky – and the most unattractive from an economic point of view.  Eventually both were retired and Air NZ, through its subsidiaries Mount Cook Airlines and Air Nelson, expanded the ATR fleet.

Fine, but these were too big for many regional routes which could sustain only 30-40 seats at most. On top of that was the increasing cost of operating to meet rising landing charges and en-route air traffic costs required from the newly-formed corporatised Airways Corporation.  No blame to them, – they were doing what they were mandated to achieve.

So whither?  We might look across the Tasman, where state governments recognised that the cost of running air services to marginal distant regional routes required airlines to bid for them and offered subsidies to sustain services.

Then there might be support for designated regional airports in sensitive areas – and Air NZ, with its substantial government ownership, might be encouraged to think more about its regional network and the right-sized aircraft. It might have to bid for the routes.

Well might Air NZ boast about its “prize-winning” international services with the new route to Newark New Jersey (no, not New York) and dropping what our intelligence suggests was the still-profitable London  route, which might have avoided Los Angeles by routeing through Houston or Chicago.

But the base support of the airline comes from the thousands of travellers who don’t occupy the Koru lounge at Auckland but depend on the national airline for travel, at reasonable cost, around NZ.

We believe the current MOT exercise needs to examine each and every cost elements of the current aerial voyage.

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