As Air NZ is buffeted by turbulence, let’s think about returning it to public ownership

Air NZ is in a parlous state. Its long-haul Boeing 777 fleet is in storage in the US and few people in the company expect them to return to service. They are heavy, less fuel-efficient than the 787 Dreamliners. The company has been hammered by the Covid-19 pandemic with international tourism decimated.

There has been a wholesale change at senior management with the loss of decades of experience.  Now many of NZ’s international connections are hanging by a thread. Is it time to rethink our whole airline strategy?

One driver has become obvious: the airline is a strategic asset. Without it, NZ would be isolated.

Should Air NZ return to public ownership?

Before the reforms of the 1980s, NZ had two airlines – National Airways Corp, which ran the country’s domestic service, and TEAL (later to become Air NZ), which provided international services. Both were owned by the taxpayer.

NAC was charged with running efficient and reasonably priced services. Fares were set by the Air Services Licensing Authority, a sort-of Commerce Commission. It had to argue in public for fare and route changes.

Anyone could – and did – appear to present a case for or against. Expert economic and aviation advice came from government departments. The airline was a prototype state-owned enterprise with a board appointed by the government of the day.

International air fares were set by the government in consultations with other government partners in the web of air services agreements which linked countries. These agreements covered everything from fares to service standards, routes, airports and so on.

Point of Order does not press for a return to those far-off days.  However, we do suggest today’s circumstances require a new approach.  One option is to return Air NZ to public ownership as a standard SOE run by a board of suitably qualified people.

It would return to provincial routes with accessible fares. Think of the cost of today’s travel on routes from, say Invercargill.  This might require smaller airliners. It would be charged the same as the old NAC – running agreed routes at a set level of fares. This means exchanging last-minute discounts, “grab a seat” campaigns for fares set at levels agreed perhaps via the Commerce Commission.

Then, Air NZ could rebuild its once-superb engineering department, returning all its maintenance onshore, making best use of the under-utilised facilities at Auckland and Christchurch airports. Given the experience of recent months, it might even invest in cargo aircraft that are more efficient than stacking freight into the passenger 787s.

It might be argued such a structure would invite political interference. This happened in the old days. Think of the cluster of airports in the Bay of Plenty, all inspired by vigorous local MPs.

On the other hand, ministers do intervene in other critical areas like education, health and social services.  In the current climate is aviation any different?

One thought on “As Air NZ is buffeted by turbulence, let’s think about returning it to public ownership

  1. Commercial enterprises like AirNZ benefit immensely from scrutiny by financial analysts and the market. Compare the performance of Ports of Auckland while it was exposed to that scrutiny with how it performs now it is fully owned by Auckland Council. Likewise the markedly better performance of the part privatised electricity companies.

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