Air New Zealand chief executive Nikhil Ravishankar.
Among the many contributors to Air New Zealand’s recent $242 million after-tax loss was the cost of providing services to some of our smaller regional centres.
There will be plenty of reasons for that – not least being the ongoing sky-high cost of jet fuel – but somewhere in the spreadsheets will be the unavoidable truth that big aeroplanes hardly ever suit small towns.
For those of us who don’t run airlines, a good comparison is the vehicle we use to commute to work.
Most days, the only one on board is you. So to minimise your costs, a smart approach would be to buy a scooter or an e-bike, thereby guaranteeing that every seat on every journey is filled – what airlines would call a 100% load factor.
Most of us, though, drive a much bigger car than the journey needs. Everything about driving the family wagon to work instead of a scooter costs more.
All these principles apply to regional aviation too.
While attending an aviation summit on September 7, Associate Minister of Transport James Meager assured that Air New Zealand had not approached him to ask if it could stop operating certain regional routes, after the airline has cut back service frequencies on many routes since the Iran-Israel-US war.
Air New Zealand doesn’t have any small aircraft. They ditched the 19-seat Beechcraft 1900 (technically operated by Eagle Air) a decade back. Today, the smallest machine in the fleet seats 50.
In June, passenger demand on regional routes was recorded as down compared to last year. So more often than they might like, our national airline is operating the equivalent of the family wagon when a scooter would do.
This is where regional airlines come in. A route that might half fill a 50-seat aircraft would instead mean a 74% load factor for a 34-seater, or a filled-to-overflowing 12 to 19-seater. That’s exactly what the smaller operators such as Air Chathams, Origin Air, Sounds Air and others fly.
But how do we get people to book a ticket on an airline they’ve never heard of?
As someone who works in advertising and dabbles most weekends in aviation, I know that it’s important for people to trust the airline they’re flying on.
This is where interlining agreements like the one Air New Zealand and Air Chathams recently signed come in.
If you want to fly from, say, Whangārei to Whanganui, the Air New Zealand website will offer you a fare that first takes you to Auckland with Air New Zealand, then the rest of the way with Air Chathams.
While you might not know much about Air Chathams, the fact that Air New Zealand has included them in your journey gives you a good reason to trust them.
Yes, you might travel on a smaller aircraft, but unless our regions’ populations suddenly grow and the cost of fuel drops just as quickly, that’s something we’re going to have to get used to.
Smaller aircraft deliver other upsides. When more people do want to travel, rather than filling empty seats on those 50 or 68-seat airliners, operators with smaller aircraft might instead add more flights. More flights equal more flexible travel options, which can lead to even more people flying.
So is operating smaller aircraft the solution to providing sustainable regional air services?
Unfortunately, no – and make that a no-with-sprinkles while fuel prices are as high as they are.
Even a fully loaded small aircraft will usually cost more per seat to run than a fully loaded large one, so regional fares can seem high compared to say a main trunk flight.
People will only pay so much for a ticket, especially when weighing up the alternatives of driving instead, or just not going.
This is where Government support like the $30m in low-interest loan funding provided recently comes in.
The need for central and local government to support regional aviation is no different to the need for them to fund roads. Both are essential, both connect communities and both deliver value to society beyond simply moving people from place to place.
Government support for regional connectivity isn’t a new idea, and it’s arguable that relying on the market as we’ve done since the 1980s just hasn’t worked.
Once upon a time, Government investment in aviation infrastructure was based on what communities needed, not just ROI. That’s why today when you fly into Timaru, Whakatāne or even Alexandra, you’ll land on a runway designed for the long-departed Fokker Friendships once operated by NAC.
Some surprisingly small airfields even had control towers – built, maintained and expensively staffed for a handful of flights each day. It didn’t make commercial sense, but back then it didn’t have to. I’d argue that it shouldn’t have to now.
Meager is on the money when he says that passenger volumes on regional routes are unlikely to support competition.
Co-operation between airlines, backed by a sensible amount of Government support, looks far more likely to get us all where we need to go.
Vaughn Davis is a former Air Force Hercules pilot who holds an Air Transport Pilot’s Licence, C and D category instructor ratings, instrument rating, low level aerobatic rating, and a formation lead qualification. He is also the creative director of Auckland advertising agency The Goat Farm.
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