Airfares on flights between Australia and New Zealand should drop in the coming months despite high fuel costs, as more travellers get moving, said Air New Zealand CEO Greg Foran.
The comments come less than two weeks after New Zealand reopened its borders to fully vaccinated Australian citizens and residents for the first time since the trans-Tasman travel bubble was paused in July 2021.
At present, Air New Zealand covers the majority of the air travel market between Australia and New Zealand, with Qantas its only rival on these routes, trailing behind on scheduled flights.
The lack of competition has seen return flights between Sydney and Christchurch soar to over $800, while Melbourne to Wellington would set you back a similar amount.
Speaking with The Weekend Australian, Foran noted that “as competition increases, that will force pricing down”.
“If we had the ability to ramp up even more, we would, but we don’t, and therefore there is a situation where the prices are high,” he said.
“Air New Zealand is literally the only operator moving across the Tasman.”
Foran added that he expects airlines to ramp up their flight schedules to New Zealand in May, in line with easing borders restrictions.
Overall, Air New Zealand continues to ramp up capacity, however, is doing so on a slimmer fleet, after cutting back to two-thirds of its pre-pandemic fleet.
“What we are going to do is we are going to use a tighter fleet and fly it heavily so that the key in this business is to get these things running 16 to 17 hours a day,” Foran said.
“The Tasman will be competitive and our biggest market so we won’t reduce capacity there and will maintain good market share.”
Airfares have also been somewhat impacted by increasing global fuel prices, which hit a recent high of US$130 a barrel last month, Foran said.
However, trans-Tasman routes have been relatively shielded from this price hike, with both Qantas and Air New Zealand boasting fuel hedging contracts to see them through the year.
Longer-haul routes are expected to take a greater hit over increased fuel prices, Foran said, however, the Air New Zealand chief is confident that fuel costs are now trending downwards.
Foran also stated that he was “pleasantly surprised” about current demand for trans-Tasman travel in light of the country’s recent border opening, noting that forward bookings from New Zealand to Australia’s major cities are already seeing a strong rebound.
Foran attributed this influx in passenger demand to people across both Australia and New Zealand seeking to reconnect with friends and relatives.