Luxon defends Air NZ domestic fares
Air New Zealand chief executive Christopher Luxon has defended the airline's pricing on domestic regional routes, saying it's one of only a few carriers in the world servicing as many small towns as it does, and that such routes are often considered uneconomic.
Speaking at the airline's annual meeting in Christchurch, Mr Luxon told shareholders regional airline economics were "very challenging" and would always be more expensive as smaller aircraft operate at a higher cost per seat.
Citing independent research, Mr Luxon said Air NZ covered every town with a population of more than 20,000, whereas just half of similar-sized towns in Australia, Canada and Sweden had air services.
The same unidentified study showed New Zealand had the cheapest like-for-like regional fares. Australia came in second with prices 29 per cent higher.
"The key for us is to up-gauge and get markets into larger aircraft to realise lower costs per seat to keep a downward pressure on prices," Mr Luxon said.
In August, Prime Minister John Key said he had told the airline it should lower regional airfares if it could, and was supported by Commerce Minister Craig Foss.
Separately, the New Zealand Airports Association lobbied the Commerce Commission to regulate Air New Zealand's regional air fares, where the national carrier has an effective monopoly.
Mr Luxon said one of his priorities in 2014 had been to engage with mayors, chambers of commerce, airport management and business leaders to better understand the needs of regional New Zealand.
"We recently announced our new domestic pricing structure, with four options tailored to what customers value and offering increased flexibility," he said.
"This was developed following focused feedback sessions with customers, and the reviews have been extremely positive."
In August, the airline reported a 45 per cent lift in annual profit, and announced a special dividend after reviewing its capital structure, something Mr Luxon on Tuesday put down to turning the international business back into a profitable unit.
"Profit from our regional network has declined over the last five years, and our average regional airfare is down two per cent over the last five years," he said.
Email the Travel Weekly team at traveldesk@travelweekly.com.au
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