A big study into the domestic aviation market has found significant challenges to growth in the regions.
The report NZ Airports: Future Infrastructure Requirements, released by NZ Airports, finds that moves by Air New Zealand to reduce passenger capacity on regional routes coupled with significant cost pressures on regional airlines are threatening regional connectivity.
The study’s release comes days after Stuff reported that Taupō has again lost air links to Wellington, with the withdrawal of Originair on the route.
The report was undertaken by WSP, with the support of NZ Trade and Enterprise, and found that the risk to the aviation network is two-fold; smaller airlines are facing increasing cost pressure to maintain current level of operations, and their ability to expand and supplement NZ’s future network direction is becoming limited.
Second tier airlines, whose networks have minimal overlap with NZ include Air Chathams, Sounds Air, Barrier Air and Originair which have stepped in to operate routes discontinued by NZ.
. . . Supply Chain
Post C-19, the global supply chain for many aircraft parts is severely hampered. Parts for the ageing aircraft currently used on the regional domestic network are becoming almost impossible to source.
Operators have cited maintenance cost increases of 300%. ‘’Critically, those that own their aircraft are likely to secure a higher investment return by leasing their aircraft internationally rather than operating regional flights in New Zealand,” notes the report
Labour and capital are also significant challenges to this airline group, with engineers and pilots often sought by larger airlines.
Additionally access to, and the cost of capital, limits these airlines’ ability to upgrade their fleet, avionics capability and training aids including simulators. ‘’In short, economies of scale are against this cohort of smaller airlines, and while they continue to serve communities, their ability to maintain and grow is at risk.’’
While NZ has 86% of the domestic market, tier two airlines have just 3% of it, shows the study.
Operators having come and exited the market include Qantas, Ansett, Pacific Blue, Origin Pacific and Jetstar’s regional operation.
NZ’s 50- to 56-seat Q300 fleet is ageing with no replacement announced and the study identifies the absence of a 19- to 50-seat regional plane as a big gap. The economics of aviation depends on matching the right routes with the right aircraft, and currently aircraft manufacturers are not developing aircraft between 19-50 seats that would serve as a suitable replacement aircraft for regional routes, it adds.
