Deputy PM Winston Peters wants a new-look Air NZ to reflect the vastly changed domestic and international airline market. What might this look like?
NZ, like the rest of the western world, faces an existential decision on the future of its airline requiring a fundamental reassessment of the airline industry
Air NZ is going through the hardest days of its life. Qantas has been badly hit, cancelling all long-haul international services. Virgin Australia has sunk into administration buried by a mountain of debt – it owes more than $A6.8bn to more than 12,000 creditors, including $A450m to employees, banks, aircraft financiers and landlords.
Across the world airports are clogged with laid-up airliners. Singapore Airlines is flying its Airbus A380s to storage in the US desert.
Former Qantas CEO Geoff Dixon argues Australia, apart from its rich Melbourne-Sydney-Brisbane routes, was big enough for only “one and a half” airlines. NZ is pretty much the same.
Changing Air NZ will require major shift in government policy. The immediate future could be secured by converting Air NZ into essentially a “public service” operator providing important services across the main trunk (Auckland/Wellington/Christchurch/Dunedin), regional services large and small, plus selected international routes at reasonable fares which does not automatically mean cheap fares.
The days of cheap international travel are gone for the foreseeable future. Budget airlines have had their day.
New social distancing requirements will require airlines to no longer fill every seat. This will increase their operating costs and suggests that air travel will return to the 1940’s and ‘50s when fares were high.
Such a change in NZ suggests a return to the original concept of the old National Airways Corporation. Its founding legislation said the intention was to provide accessible services at an operating profit if possible. This would require the government to assume majority control of the airline.
All Air NZ’s engineering could be returned to NZ, given the vast and under-used base at Christchurch along with Auckland. This would require a build up of tradesmen.
It was back in 2006 when a former CEO decided all wide-bodied maintenance would be done offshore to save costs. Cost saving might have happened – but it also reduced the capacity of the airline to look after its airliners at home.
Before 1983, NZ air transport was controlled by the Air Services Licensing Authority, chaired by a lawyer and two other members from the business and aviation world. It controlled fares, routes and standards of service.
For example, when National Airways Corporation (later merged with Air NZ) wanted to raise fares, it had to justify the increase before the authority whose meetings were open and anyone could attend or appear.
The authority was no rubber stamp. It could also hear applications by new operators to run air services. These were allowable provided they did not undermine NAC’s basic operating principles, laid down in its legislation, to be a “public service” airline, serving the regions and the main trunk with reasonable fares and service.
A major complaint of Air NZ – and before it, JetStar and Ansett – was the structure of NZ airports. They used to be run as joint ventures by local authorities and the Ministry of Transport. There were no private-sector owners seeking full economic returns.
Airline and retail income was generally pooled on the basis that the airport was present to serve the industry and not the other way round.
At present the Commerce Commission determines a rate of return for the airport companies but the airlines have always railed against this, arguing that landing, parking and terminal charges are too high.
Is the Deputy PM on to something?
He would find a ready response from the regions. If the government is committed to developing a new post-Coronavirus economy, this may play a part.