By Jason Walls
New Zealand First MP Shane Jones well and truly wins the prize for the best political play of the week.
Jones, who is also the Minister of Regional Economic Development, made headlines after calling for Air New Zealand chairman Tony Carter to resign.
It was a bold move – under Carter’s watch, Air New Zealand has become one of the country’s most successful companies.
Carter’s crime? Air NZ’s canning of some of its less profitable regional flights.
Jones was not happy.
“This is a legitimate issue on behalf of those provincial areas that have been short-changed,” he told RNZ on Tuesday morning.
He went on to say Carter has more concern with “the nameless shareholders in Wall Street than he has for his fellow provincial citizens,” suggesting it was time for the chairman to hang up his hat.
The Government owns 52% of Air NZ – Jones says because of this, it has a responsibility to the people of New Zealand.
But, at the end of the day, Jones has no bearing over what happens at with Air NZ's board. That’s the Finance Minister’s job.
And Jones knows this. So why did he embark on this crusade?
“I am a champion for the provinces,” was the phrase he repeated numerous times when questioned by the media on the issue.
He would not apologise for his comments, instead using the airtime and column inches he received to reinforce his loyalty to New Zealand’s regions.
“If anyone on that board believes they are going to muzzle me as a champion for the provinces, they are sadly mistaken,” he mused.
For his outbursts, Jones received less than a slap on the wrist.
“[Jones] is absolutely entitled to an opinion, which he has shared, but suggesting anyone from the board should go is a step too far,” Prime Minister Jacinda Ardern said.
That was the end of it as far as she was concerned.
In fact, she even told reporters that, as Jones was a strong defender of the regions, “[his comments] won’t surprise anyone.”
A calculated move
Jones’ grandstanding was clearly a calculated move designed to win the support of voters in the regions.
It was always going to be a win, win for NZ First.
Rolling coverage of NZ First standing up to corporate boards on behalf of regional New Zealanders – check.
Being publicly reprimanded by the Prime Minister for standing up for the people in the provinces – check.
Many voters in the provinces would have lapped this up.
The move also helped put a bit of much-needed daylight between NZ First and Labour, which have largely been a solid unit since forming the Government five months ago.
NZ First has suffered because of this. The most recent Reid Research poll saw the party’s support almost half to 3.8% – meaning without an electorate seat, it would be out of Parliament.
A subsequent Colmar Brunton poll saw the party sink even lower.
Although NZ First Leader Winston Peters has always maintained polls don’t matter, the numbers likely rattled him.
How lucky is he that Jones just happened to come across a quintessentially NZ First issue and thrust it into the political limelight?
57 Comments
Of course Jones is learning at the foot of the master, Winston.
Both Bridges and Ardern in their comments have seen Jones has hit on a vote winner with many and stated their own "long held concern about Air NZs service to the regional airports" or some such. Politically Jones has the other two party leaders supporting him! Genius. Bridges only said something about "the delivery" not the substance of Jones position.
I think it's good for democracy to have someone like Jones embolden regional Mayors! Local government politics importance at National level is on the rise. They have been ignored, fact. Jones sees this.
And I think NZF are actually quite genuine about too. Not just about votes.
Good piece.
There was an anti National element in the last election arising from a perception that they courted the corporate world as a priority and had not much concern for the everyday, ordinary people on the street. They set about creating “Corporate New Zealand” with as little regard as any big corporate has for minority shareholders, except in this case we are called taxpayers. This episode here in its own way, illustrates all of that. Here is a company in which the majority shareholder is the NZ tax payer. The company is driven by commercial reality and prioritises profits, that is its mission. That means some shareholders are disadvantaged. There it is. That’s how National had it too.
Maybe the media should actually pick up the real story of the near monopoly airline to see whether it is withdrawing flights from provincial areas, and removing engineers from provincial airports, and charging near monopoly/duopoly prices?
A reporter could list all the airports, number of flights per day for each, with areas that have been closed or reduced in the last few years, and how many engineers have been moved from areas or gone. Then a daily scan on Arrivals/Departures re how many delays and cancellations due to technical issues.
Sure, there’s politics being played - but why not investigate the corporate practice issue that has been raised? Or are the PR spindoctors deflecting to the political story to protect their financial interest?
Don't agree. The Govt should leave Air NZ out of its plans to provide regional development. Drawing them in will just involve cross-subsidisation which won't end well for the national airline. That will just allow competitors to pick them off on high-volume routes.
If the Govt wants to persue a particular regional deleopment strategy that involves air links, it should start its own KiwiAir service and fund it to the extent it wants. Two things would then happen. They would be exposed to the true cost of their policy without free-riding on others, and secondly they can target exactly what they want.
Forcing non-commercial decisions on AirNZ is a good, quick way to ruin a viable airline and confuse their role. Clearly AirNZ are meeting their core 'responsibilities' to most New Zealanders as evidenced by their high loyalty levels and high satisfaction ratings. To force service to a tiny extra squeaky-wheel constutuency will be distortionary. Better to have KiwiAir formed for that solely political purpose.
Why start a new airline ? Split AirNZ into two, one for international travel, where they can be as commercial as they want and the other for domestic travel, which can be floated and funded by New Zealanders and the government for developing, sustaining domestic routes for national development. Split the assets, staff and resources and give clear direction to each. May also involve cross subsidies to the Domestic wing from the profits made on the International sector. National development has to be a key focus. Profits alone are not enough.
The view gaining ground is that AirNZ is not clearly meeting its responsibility to NZ. That is the Dissatisfaction rating that is not being published.
Actually, that would make matters worse. Focusing the non-commercial cross-subsidising only on the domestic market would put high-volume fares up domestically for AirNZ National but not Jetstar. And it would encourace others to jump in to cherry pick because main-line fares would be higher. Worst option.
No, the real cost of providing 'support for the regions' is more transparent when it is provided by a separate, not-for-profit airline (like KiwiRail, like KiwiBank). Mixing commercial motives with political motives never ends well for anyone. (Like TVNZ - and Labour now seem to agree, allowing RadioNZ into TV for public broadcasting reasons.)
Yes, the Dissatisfaction rating in increasing, certainly.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=120…
"Clearly AirNZ are meeting their core 'responsibilities' to most New Zealanders as evidenced by their high loyalty levels and high satisfaction ratings."
Are they?
Lets translate that to the regions:
High loyalty = only choice.
High satisfaction ratings = never ask domestic customers.
Air NZ are diabolical in the regions. Flights are often cancelled with little to no notice due to either "operational" or "Engineering" issues. Prices are exorbitant, and service is worse than most buses.
Fly NPL to AKL at least once a week like I do, then you will understand.
Sounds like there is a fantastic commercial opportunity for the folks in NPL to set up their own airline. Clearly, everyone will support it. You can charge 'sensible' fares and hopefully expect even more business. Win-Win.
Is there some reason airlines or communities are holding back from doing that? Surely it wouldn't be because it would be a commercial dud, would it? The people of NPL should put their money where their opinions are if they think they can do better. Or perhaps they remember Kiwi Regional Airlines (2016) ?
Forcing certain failure on to Air NZ is hardly good public policy. And a toxic base on which to build a regional development strategy. (ditto KiwiRail which is already a loser in this regard.)
As you know, there are high start up costs involved with airlines, particularly when the incumbent loss leads. It is a commercial dud, fighting a giant monopoly that can "lose" money on all fares until you are gone.
We all know how well air NZ did when they had "actual" competition. They effectively went bust and required a Government (Taxpayer) bailout.
Maybe there was a fantastic commercial opportunity to let them fail, and have some newer, more responsive airlines flourish.
As you know, there are high start up costs involved with airlines, particularly when the incumbent loss leads.
Ahh...what?
You start your argument based on the fact that Regional Link prices are high and service is poor. Then you assert that the service is a loss leader?
So, you expect AirNZ to further subsidise air travel in your region?
c'mon. Again, you're arguing for the sake of it.
It comes down to simple economics - In this context an airline seat is competing with a vehicle trip. You want to lower costs, lower the costs of a vehicle trip.
We can see that reflected in pricing. Generally speaking, a seat to NPL ex AKL is around the $80-$100 mark at the 1 month lead time.
Coincidentally, the marginal cost of vehicle usage and opportunity cost of time is also going to be anchored around that value.
I just can't see how you think it is overpriced. Or that there is no competition.
As I said, it's priced relative to competing methods of transport - in this case private vehicle usage.
Your choice to drive is perfectly rational. It doesn't mean at all air travel is over priced.
The airline is indifferent between your party being 1 or 2 people, whereas you are - obviously you can price your costs at the marginal unit.
It is overpriced. Because as everyone, everywhere has noticed, it is cheaper to fly Auckland to Wellington, or Auckland to Melbourne, than it is to fly Auckland to New Plymouth, or Auckland to Nelson.
That has zero to do with competing modes of transport. It is to do with overcharging on the regional fare to allow for losses on the larger routes.
If Air NZ was as commercially savvy as you all think, why did you, me, and every other tax payer have to bail them out?
So you have a detailed knowledge of their P&Ls, do you?
As for That has zero to do with competing modes of transport. It is to do with overcharging on the regional fare to allow for losses on the larger routes.
Fine if you don't believe that air travel is competing with land based alternative travel routes. However, you are wrong. I suggest some reading on IO in the airline industry - there is a metric shit tonne of it.
Think of it this way (simply)...
If it cost $20 to travel by vehicle to New Plymouth, it took 1 hour to drive the route, and Air NZ's marginal cost was $20...what price do you think Air New Zealand's fares would be anchored around?
Guess there is a fantastic opportunity for the Kiwis to work on this and demonstrate their acumen in business as well as national development then. Otherwise we will have to admit that the less populated regions and squeaky wheel constituencies are always condemned to their dire status as now....
"We have Skydiving operators all around NZ flying loops to 13k ft in 25mins making big money."
I like your apples with chocolate comparison.
It does leave me confused.
Are you saying Air NZ should enter the scenic/sky diving market?
Or are you saying that one of the skydivers should start loss leading and only charge $1 a flight, until all other operators are out of business, then say they lost so much and are vital to the industry, that the Government should now fund them?
Well Lufthansa for example has Eurowings. Iberia has Vueling. Then there is Air Europa who you find yourself almost unknowingly ticketed on quite often when booking through either of the above, Alitalia & Air France as well. They all work on short hops between both small and large airports. The population is there in abundance both as citizens and tourists. The equivalent NZ “market” could not be more different.
'To force service to a tiny extra squeaky-wheel constutuency will be distortionary.'..
How many other services does this sentiment apply to ?
Hospitals, Electricity, Communication (Mobile services), Banks, Postal and more such essential services for New Zealanders ?
Oh, sorry, such 'Squeaky-wheel Constituencies' have no justification to exist in out Paradise which is only for the well connected, pun intended.
Government planning and direction for economic development is also a Capitalistic theme. Otherwise democracies would not have Ministries for Commerce, Economic developement, etc. After coming to the rescue of various enterprises during GFC, the governments have more of a role in planning and directing growth in desired sectors. It is not 'Free for Few' any more.
I think we should be careful of having Govt Departments delegating their regulation enforcement responsibilities to the private sector. I reckon you are asking for enforcement trouble that way.
Yes, encourage behaviour through law and tax initiatives, but don't force private commercial enterprises to do the enforcement work. It will only get cocked up.
If Governments want to use the market to achieve something, they need to stand in the market with a competitive, transparent offer to consumers. Then the real value of what they are trying to achieve can be tested to see whether those that will benefit are prepared to change their behaviour. If they don't, then the policy is rubbish. If you push it through existing channels by fiat and it fails, all that happens in that more and more blame is placed on the channel and not the policy, and in the end everyone loses. Public policy initiatives should be delivered publicly.
How quickly history is forgotten
New Zealand once had a stand-alone domestic airline until 1978 when it was forced into a Muldoon government led amalgamation with Air NZ – the logic at the time made sense – rationalisation of the fleet and aircraft maintenance and servicing and head offices etc etc – who has benefitted the most? – left alone as a separate organisation NAC would be concentrating on the domestic market – it doesn’t appear the expected benefits are being achieved in the domestic arena
https://en.wikipedia.org/wiki/New_Zealand_National_Airways_Corporation
2018
Flying distance Auckland Invercargill 1186 kms – Air NZ airfare $600 NZD
Flying distance Auckland Sydney 2155 kms – Air NZ airfare $200 NZD
Te Ara – Aviation – Government Intervention
https://teara.govt.nz/en/aviation/page-7
Despite difficulties, NAC managed a spectacular expansion of air services. By December 1951 it was carrying passengers on a network from Kaitāia to Invercargill. Provincial businesses, politicians and citizens were quick to appreciate the service, and increasingly reluctant to risk disruption or loss by any dismantling of NAC. The airline had regained profitability by 1952, and National’s threat to sell it receded. Politically secure again, NAC remained the dominant airline until its enforced merger with Air New Zealand in 1978.
The merger of Air NZ (previously TEAL) with NAC was perceived publicly as a takeover by the former. Perhaps it made sense but the process was flawed, NAC immediately became the poor cousins in the new hierarchy. Air NZ has many critics, me included. I identify strongly with former CEO Norris findings on his arrival, that the airline was all about flying planes, not passengers.
Your AKL - SYD vs AKL - IVC example ignores a commercial reality. There is only one flight per day to Invercargill = 100 seats. There are about 20 flights per day involving 3,500 seats for AKL-SYD, maybe more. Any flight basically involves a set of fixed costs paid for by the passenger fares. The fixed costs for an Invercargill flight won't be radically different to the Sydney flight. A bit of extra fuel may be the only variable cost, and with high-efficiency aircraft these days that may be minor. Divide those fixed costs by the sold number of seats and you will quickly see why there would be a difference, and a really big difference.
The key to airline pricing is the size of the divisor.
The biggest costs are fuel consumed on takeoff, airport charges, capital costs, maintenance costs, IT costs, head office costs, these will be roughly the same on both? (both will have 2 pilots?) How many ppl on a flight to that god forsaken place? and how many to OZ? 30 v 300?
PS what was the cost of fuel in the 1950s and 1960s v today? Probably around $10~20USD per barrel of crude while in 2008 it went to $148US and in-arguably caused the GFC. What planes were they flying in the 1950s? DC3s? probably ex-war surplus they picked up for little?
Up until International air travel took off, say after the Jumbos arrived, governments thought they were quite handy at running airlines. In Australia it became farcical. TAA & Ansett were forced to fly almost exactly the same timetables on same routes every day. NAC here never had competitive except for a brief attempt by an outfit called SPANZ who were quickly shut out. Those domestic operations were absorbed into Qantas & Air NZ inevitably because international travel was perceived as the priority commercially and nationally, carrying our flag and connecting us to the world. The problem is that NZ is so small and remote that there is no platform for let’s say, a secondary market of air lines doing short hops such as have sprung up in the dense population areas of many parts of the world. Our population is long and thin like our country.
'Jones’ grandstanding was clearly a calculated move designed to win the support of voters in the regions'
Which 'regions'? - NZF might pick up a few more votes in a limited number of NI regions but none in the SI where most sizeable urban populations have air service within a couple of hours driving.
I've flown the provincial air routes on business for years. Service is unreliable, costly and generally a pain. But it's just another challenge that you plan for and overcome. The idea of the government running an airline, with social service obligations as a taxpayer funded responsibility, sends shivers down the spine.
The issue is a 5 minute wonder. Jones will come a greaser on some other issue and will be consigned to history.
Every government underwrites and bails out their national airline whenever necessary, as it is the necessary link for tourism, immigration, business externally, and is the nations flag-carrier. So the competition is not really on a level playing field or market. Helping to link the regions better would actually serve a wide economic purpose for the government, and help business. Just like all governments underwrite schools, roads, electricity, courts, etc so that business can function smoothly.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=120…
There is a huge difference between Public roads, Public Schools, Public hospitals and subsidising airlines IMHO, the first are essential, the last not as there are other transport mediums or simply move the business.
Besides which with Peak Oil airlines are toast within 20 years anyway.
Asia's airline wars: The great profit squeeze in the sky
https://asia.nikkei.com/magazine/20180111/On-the-Cover/Asia-s-airline-w…
I actually have a fair bit of sympathy for Shane Jones stance, however, my understanding is that the planes the AirNZ flew in and out of these smaller destinations are no longer being built, so there is nothing to replace the aging small fleet with. Apparently, they would have to go to a larger plane, and after a certain number of seats (might be 19) they have to have a steward on.
I think the likes of Chathams fly even smaller planes, don't they, which I doubt AirNZ would be prepared to get into.
Having lived in an area where if you wanted to fly anywhere, you had about 3 to 3.5 hours driving to get you to an airport, depending on which direction you went in and which airport you wanted to leave from, I know what a mission it can be.
Chatham air flies 50 year old Convairs. They are noisy, vibrate and sometimes leak water on your head. A fun experience ....... for the first few times.
Of the people moaning about driving form Kapiti to Wellington airport, I wonder how many actually work for Kapiti businesses vs those who choose to live there as a lifestyle preference?
So many short memories about how Air New Zealand suffocated any competition over the years by undercutting them or bought them out - Freedom Air, Eagle Airways - wound down and ended 2016. Fascinating (not) to see how ANZ has operated over the years. Seems some commentators are delighting in the outcome for the peasants in the regions (not the main ones) being left with OZ
Jetstar and their appalling service, cancellations,short staff cancellations etc. Thanks guys. Guess they are not Kiwis with a 52% stake in Air New Zealand.
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