Jetstar to pull out of New Zealand Regional Market
Jetstar has revealed plans to stop flying its Q300 Turboprop services to regional destinations. The airline announced Early Wednesday Morning (NZDT) that the airline would stop flying the routes by the end of November. This proposal comes after the Airline CEO, Garath Evens, said that “The proposal was based on the operation losing money, combined with higher costs and a softening of the regional travel market.” The proposal will not affect Regional Jet Services and International Services
Jetstar, which current flies to 5 regional Destinations;
|Airport||Flights out of Airport|
|Auckland||Napier, Nelson, New Plymouth & Palmerston North|
|Nelson||Auckland & Wellington|
Began services on December 2015, and offer up to 130 flights a day during the peak season to the five destinations. The airline started strong, with excellent customer feedback among domestic fliers, with most people happy that Jetstar was able to offer cheaper flights to the regions. However, passenger numbers began to dwindle as Air New Zealand lowered prices significantly. And they squeezed in more trips per day with higher seat numbers causing Jetstar to panic. In the proposal, Jetstar was quick to point out higher fuel costs and a change in the economic headwinds; however, some people thought different.
Benje Patterson, an economist, and aviation commentator commented that Sir John Key might be to blame. John Key has been called the smiling assassin, has caused several high ranking officials inside Air New Zealand and Bank of New Zealand to resign. Benje said “Air New Zealand’s August operating statistics showed that its recent domestic growth has been coming from shorter regional flights. This trend was highlighted by the fact that passenger numbers rose, despite total passenger-kilometres falling. Jetstar and Air New Zealand competed head-to-head on some of those regional services. Air New Zealand’s regional demand growth has come at the expense of Jetstar. Predatory price cuts from Air New Zealand have boosted demand for its services. Jetstar has faced a squeezing of margins due to these lower ticket prices, which when coupled with a weaker demand outlook and the prospect of higher fuel prices, has led to it pulling the pin.”
Twenty thousand passengers have been estimated to be affected in the long term. The people who have booked flights next year have been offered a discount on flights rebooked onto Air New Zealand Link Services, and have been offered a refund. Air New Zealand has stated that they will keep prices starting at $39NZD until late 2020 for rebooked Jetstar customers. And keep costs low for Air New Zealand being the sole carrier into several domestic destinations. However, several people have claimed that ANZ won’t keep prices low. Several MP’s in the affected regions and Brent Thomas have made statements saying this is unlikely. “We know where there’s competition that’s good from a pricing perspective and also availability. The way an airline works is if the availability in a lower class of fare is not there they want you to go up to the next class. But when there’s more competition, there are more choices. As soon as you take away one of two airlines. The average price that is paid on those routes likely becomes more expensive”
Jetstar began a consultation period with 70 employees which has already started, and an announcement is expected to be made by the end of October.
A flight from Auckland to New Plymouth on October 8 is advertised at $91 on Jetstar at present. The cheapest Air New Zealand flight is $128. If a passenger wanted to return a week later, Jetstar offers a $68 flight – Air New Zealand’s cheapest is $148.