NZ Regional

New Zealand might be compact but aeronautically speaking, is quite crowded for its size. It’s had its share of regional airline failures over the years, yet today it has 15 commuter services plus charter and freight planes plying routes that hop islands and criss-cross the country to regional ports.

Given its size and the proximity of cities and towns to each other it’s a fine line between what constitutes domestic, as opposed to regional services.

As a rule of thumb, domestic services are considered trunk routes between main cities while regional services are categorised by the size of the aircraft, the population they are servicing and the routes they take – sometimes region-to-region. But even then this is not a clear-cut definition for New Zealand.

For local government purposes the country is divided into 16 regions. New Zealand’s new Census figures are due out shortly so available population statistics are old though some regions have done their own updates. Auckland, with a population of around 1.57 million people is by far the largest domestic port. The country’s capital, Wellington (population 203,800 in 2015), Christchurch (367,800 in 2015) and Dunedin (127,600 in 2016) are also considered domestic ports based on the size of the cities and to some degree by the fact that by linking them they form a backbone, down both islands.

Hamilton (population 141,612 in 2015) and Tauranga (137,900 in 2017) are larger cities than Dunedin but are quite close to Auckland so are considered more regional than domestic ports. It takes only an hour to drive between Auckland and Hamilton, for example, nearly half of it getting out of Auckland.

At the other end of the population spectrum is premier tourism destination Queenstown, which has a permanent population of just 28,224 but 2.14 million international and domestic passenger passed through its airport in the year to June 2018. As such it attracts a mix of jets and turboprops.

The two biggest home market aviation players in New Zealand, Air New Zealand and the Qantas-owned Jetstar New Zealand, operate both main trunk and regional routes.

Smaller third-tier operators such as Originair, Sounds Air and Barrier Air operate a mix of aircraft from ATRs, to 18-seat Jetstreams, plus Saab 340s and Cessna Caravans.

Chatham Islands-based Air Chathams has a particularly colourful mix, including an old DC-3 (used for charters and scenic flights) two 50-seat Convairs (plus a third for freight), two Fairchild Metroliners, three Saab 340s, a Rockwell Commander 690 and a Cessna 206.

‘It’s a fine line between what constitutes domestic, as opposed to regional services.’

Minister’s wrath

When airlines announce new regional routes in New Zealand there is much fanfare in the chosen region, but when a service ends because it is not viable they also wear the wrath of the community.

Such was the case in March when Air New Zealand gave three weeks notice that it was pulling the plug on it Auckland-Kapiti Coast service from April 3. The airport, at Paraparaumu, is an hour’s drive north of Wellington.

Not only were locals incensed but the Labour Government’s Regional Economic Development Minister, Shane Jones weighed in with a vociferous attack on the airline and its chief executive, Christopher Luxon, at one point calling the carrier a “corporate taniwha” when it came to its provincial air services. (In Maori mythology taniwha are water monsters that sometimes kill and eat people.)

Jones has barely let up since with his public tirade against the airline, claiming it was irresponsible for the NZ$5 billion company to degrade its provincial services when the likes of a new terminal was being built at Kerikeri Airport in his constituency in the Far North and other regional investments were being made throughout the country.

In a timely announcement during this melee, a small airline, Fly My Sky announced it would start scheduled return flights between Auckland and Whangarei from October 23, twice daily on weekdays. The carrier under the previous name of Mountain Air operated a combined freight and passenger service on the Kerikeri route.

Air New Zealand hit back at Jones, saying it acted independently of the government and that a lack of commercial independence could damage the interest of all shareholders, including the government, which owns 51 per cent of the airline.

In May when Prime Minister Jacinda Ardern appointed Christopher Luxon to the Prime Ministerial Business Advisory Group, Jones accused him of being “a celebrity”.

But had Jones taken a closer look at Kapiti he would have found the writing had been on the wall for some time and the route withdrawal wasn’t as abrupt as it appeared. Air New Zealand had been working alongside the local Kapiti and Porirua chambers of commerce since last year, looking at ways of lifting passenger numbers to a sustainable level. Just weeks before pulling the plug the airline and the chambers organised an open day at the airport that attracted more than 1,000 people who said they supported the direct service to Auckland.

Air New Zealand’s regional affairs manager, Ian Collier was positive about the day that attracted both leisure and business travellers wanting to avoid the peak-hour traffic crawl into Wellington. It was only when forward bookings failed to materialise that the airline chose to end the service.

‘The route withdrawal wasn’t as abrupt as it appeared.’

Economic importance

A gutted Kapiti Chamber chair, Heather Hutchings gave Air New Zealand little wriggle room over its decision, stating publicly that travellers had faced ongoing cancellations and delays of the service and claimed its end would “leave a hole in the region’s economy”. Businesses threatened to move elsewhere.

Air New Zealand did, however, contribute NZ$50,000 alongside the council’s NZ$150,000 for a marketing scheme to get the route active again. Fortuitously for Hutchings and the community, Air Chathams had just bought a 34-seat Saab 340 from collapsed Hamiltonbased Kiwi Regional Airlines after it failed to get traction on routes from Nelson to Hamilton, Tauranga and Dunedin seven months after starting operations.

Chathams, a savvy third-tier airline operator that has been around since 1985 stepped into the breach with its founder, Craig Emeny, co-flying the inaugural service in August from Auckland to Paraparaumu’s Kapiti Airport on the Saab. It now operates 36 flights a week on that route

It is not the first time Air Chathams has replaced an axed service. In May 2016 when Air New Zealand cut its Auckland to Whanganui route, Air Chathams took over immediately, using one of its Metroliners. The Whanganui District Council mayor Annette Mains noted at the time Air Chathams’ reputation for providing a reliable and efficient service that met the needs of the community it operated in. Emeny received a Queen’s Birthday honour for services to aviation last year.

When Jetstar announced its services into New Plymouth in 2015 the city’s airport brought forward parts of an NZ$11 million redevelopment of its airport to accommodate the airline and extensions were made to the runway apron. The mayor, Andrew Judd said the new service was a real boost at a time the region was suffering a downturn in the dairy and oil and gas industries.

Regional needs vary greatly depending on whether they are tourist or business focused – or both.

When Air New Zealand recently shifted one of its weekday Wellington morning flights to Blenheim in the Marlborough region to the middle of the day as a result of customer feedback the local mayor, John Leggett expressed his pleasure about the change allowing people travelling to and from Wellington to do a halfday of business in both towns.

Connectivity

Nelson-based Originair founder, Robert Inglis, a regional airline stalwart, knows the importance of the provinces having air connectivity, having been in the regional airline business for more than 30 years – and not without its pains.

He started Air Nelson in 1979 then sold it to Air New Zealand. It operates today as Air New Zealand Link. In 1997 he and a group of shareholders started Origin Pacific Airways with schedules from Nelson to North and South Island ports until it folded in 2006 because it could no longer pay debts to airports or the Inland Revenue Department.

It operated codeshare flights on behalf of Qantas subsidiary Jetconnect between 2001 and 2004 but lost close to 60 per cent of its business when Qantas cancelled the arrangement on routes that included the popular tourist destinations of Rotorua and Queenstown and began operating on them with its own Boeing 737 jets.

Inglis came back into the airline fray in 2015 with Originair, operating a service with a Jetstream 32 from Nelson to Palmerston North. After a few hiccups he has slowly built up the business again so that it now flies direct services not only to Palmerston North from Nelson but to New Plymouth with flights on Friday and Sunday afternoons going via either of the two towns in a triangle service.

The airline now has two Jetstreams in service and a third on the way. In an ironic twist his airline is temporarily operating out of the old Origin Pacific building at Nelson Airport while the airport builds a flash new NZ$32 million terminal with extra car parks to complement a new NZ$6 million 22m air traffic control tower, which opened on August 30.

Nelson is a busy regional airport with projections of 1.4 million passengers annually by 2035. Air New Zealand and Jetstar both fly there, as does the tiny Takaka-based Golden Bay Air, Picton-based Sounds Air and Kapiti-based Air2there.

Inglis is philosophical about his last airline venture and is comfortable with the routes his airline is plying now. He keeps plans for the future close to his chest but said he had been looking at pre-sold air tours for the inbound market.

He describes his airline business today as a “happy little niche”.

‘He describes his airline business today as a “happy little niche”.’

Key players

Jetstar started trans-Tasman flights in December 2005 and in June 2009 began domestic services on main trunk routes in competition with Air New Zealand.

In December 2015 Jetstar started flying regional routes from Auckland and Wellington into Nelson, Napier (east coast of the North Island), and New Plymouth and Palmerston North on the North Island’s west coast, with a fleet of five 50-seater Bombardier Q300 turboprop aircraft, previously flown under the QantasLink brand in the Australian domestic market.

Since that launch Jetstar has sold more than a million regional fares for less than NZ$100 and presently has regional fares available from as little as NZ$19 one-way (excluding a checked bag), a company spokesman said. “Our commitment is to make travel more affordable and we’re always looking at new opportunities where there is demand,” he said.

That has meant working with local councils and tourism organisations to find out how sustainable a new route would be over the long term.

There was much speculation at the time of Jetstar’s regional launch that it would include Hamilton, Rotorua and Invercargill on its schedules but has not done so yet.

A year after starting its regional services Jetstar commissioned Benje Patterson, a senior economist at economic analysis and forecasting firm Infometrics, to assess the airline’s performance.

Patterson noted that the expansion was not simply a cannibalisation of Air New Zealand’s passenger base as growth has continued to be spread across both major airlines.

He estimated that by the end of 2016 Air New Zealand had an 80.1 per cent marketshare of domestic passengers, down from 84.3 per cent in 2015.

But with no new regional routes and Air New Zealand continuing to expand, notwithstanding its withdrawal from Kapiti and Whanganui and axing of service to Whakatane, Westport and Taupo three years ago, Jetstar’s percentages have slumped slightly.

In March, aviation analytics companies CAPA and OAG calculated Jetstar’s marketshare of domestic capacity had dropped from 19 per cent in early 2016 to 17 per cent, while Air New Zealand was around 80.1 per cent, and smaller independent regional airlines accounted for around two per cent of the market.

‘Air New Zealand announced it would grow domestic capacity by 4.5 per cent.’

At the end of March this year Jetstar was flying 12 domestic routes (seven trunk with A320s and five regional with the Q300s) through nine New Zealand ports while Air New Zealand (after ending Kapiti) was flying 41 routes, and to 20 destinations.

Air New Zealand announced in July it would grow domestic seat capacity by 4.5 per cent with 630,000 more seats this financial year, 265,000 using its turboprop operation, on the back of increased tourism demand.

Travellers have been critical of Air New Zealand operating the turboprops at peak times on main trunk routes such as Christchurch to Wellington. Some of the increased number of turboprop seats will be absorbed into these routes but not all, a point that appears to have gone unnoticed by Minister Jones who in one of his rants about Air New Zealand claimed it was “wanting to continually downgrade regional services whilst we are spending money to develop regional opportunity”.

He didn’t react to announcements such as Air New Zealand’s plans to operate up to an additional 12 one-way flights between Napier and Auckland each week at peak business times from the end of October.

Air New Zealand’s Ian Collier said the additional flights between Hawke’s Bay and Auckland come in response to growing demand from business travellers.

“It’s great to be able to meet the needs of businesses, with the additional flights offering those travelling from Hawke’s Bay the option of three services to Auckland before 8.30am and customers heading to Hawke’s Bay three flight options after 5pm,” he said.

Domestically, the national carrier flies 17 A320s configured with 171 seats, 26 68-seat ATR 72s and 23 50‑seat Q300s.

Southern cry

While profitability is in easier reach for regional airlines in central New Zealand it’s a more difficult proposition for local government in the country’s southernmost city, Invercargill (population 54,800) to argue a case for more scheduled and direct flights.

At the end of 2016 Air New Zealand signed a memorandum of understanding with Southland stakeholders to work on initiatives to work collaboratively with a focus on creating greater distinctiveness and scale for tourism in Southland.

Events, such as the Bluff Oyster and Seafood Festival, are now showcased through Air New Zealand’s promotional channels and Southland footage is included in campaigns when a location in the region is a lead destination for the airline.

The MOU included a commitment to quarterly working meetings between regional and airline representatives to identify marketing initiatives, particularly in the domestic market, to attract more visitors to the region.

It came after an NZ$13 million redevelopment of Invercargill Airport’s terminal. In September Airways NZ announced that five air traffic control positions would be relocated from the airport once a new digital control tower was put in place for remote management by 2020.

Last year Invercargill MP Sarah Dowie and the region’s tourism body, Venture Southland found in an air travel survey of 651 respondents that many chose to travel to airports outside the region to board flights with more than half driving to Queenstown Airport and 36 per cent to Dunedin Airport because of the cheaper cost and the availability of connecting or direct flights.

The Southland Regional Development Strategy governance board chairman Tom Campbell said as long as there were no direct flights from Invercargill to Auckland, people were bound to choose to travel to Queenstown or Dunedin to travel directly.

“We should not be driving for hours to simply catch a flight when we have a fully functioning airport and demand to fill services,” Dowie said.

Some observers reckon that Stewart Island could be the Southland region’s unexpected goldmine in the future. The island, a short boat ride or a flight across Foveaux Strait from Invercargill, is largely a flora and fauna sanctuary where kiwis run around during the day and its population numbers only 402. It’s a time warp of yesteryear in the nicest possible way – uncrowded and untainted, and largely undiscovered by the rest of the world. It’s what seasoned travellers are searching for in their antidote to “overtourism” and the pundits reckon they will eventually find it.