The Headwinds Facing Regional Airlines
Passenger numbers on regional airlines have never been better, but the costs of running them have never been higher.
'Passenger numbers are through the roof,' says Sounds Air boss Andrew Crawford.
But it has had to 'kill off' Taupō and Westport routes and sell an aircraft, and the company is still losing money.
'I wouldn't know one airline that isn't,' he says, citing fuel, labour and maintenance as the three big costs of flying.
Add in landing fees, Airways fees and the Civil Aviation Authority more than doubling the passenger service levy.
'This is a critical issue for New Zealand,' says Crawford. 'Between us we're flying around 600 flights a week around regional New Zealand. We don't do that for fun, that's essential services, and I can tell you that a big part of it is healthcare.'
Unless something drastic happens Crawford says he can't guarantee the security of other Sounds Air routes.
He's not the only one. Air Chathams has dropped Norfolk Island and its Auckland – Whakatāne service is up in the air.
Chief operating officer Duane Emeny tells The Detail that flying is a high risk business and conditions are the toughest they've been in his airline's 41 year history.
'You're one bad day from maybe having to pull an engine off an aircraft and send it away because you had a bird strike.'
He says his father Craig Emeny, founder and chief executive, has taken the airline through the global financial crisis in the early 2000s, intense competition and even a grounding by the CAA and survived.
'He's had some real challenges in his life and this seems to be trumping a lot of them at the moment,' he says.
Both airline bosses say they have had meetings with government ministers about support for the sector but Crawford says after six years he's given up.
'For six years we've been fighting to try and get support, try and get regional aviation in this country recognised and it just falls on deaf ears,' Crawford says.
His airline is 'hanging off shareholders' mortgages' but no one is listening.
Taupō mayor David Trewavas has a brand new $9 million airport terminal built with a Provincial Growth Fund grant but he can't find another airline willing to take over the Wellington – Taupō route after Sounds Air then Origin Air pulled out.
Origin Air lasted no more than six weeks before deciding the service wasn't viable.
Trewavas says his council could not have done any more to keep either airline.
'They were looking for a direct investment in the company and I don't think it's the council's business to be a part owner of an aviation company,' he says.
But finding a replacement is not easy. Air New Zealand had looked at the route but doesn't have an aircraft available and Air Chathams is only a 'possibility'.
'There's not too many second tier airlines in New Zealand,' he says.
Air Chathams' Duane Emeny says the most important step for the government would be to give airlines access to low or no-interest government concessionary loans.
'To be really clear, it is a loan, so it is money that those airlines would absolutely be paying back,' he says.
But there's no definite response from the government.
In an email to The Detail the Associate Transport Minister James Meager says the government is currently considering a range of options to support regional connectivity and improve competition in the sector but is yet to make any decisions, including on whether access to concessionary loans would be the right thing to do.
'We are committed to supporting existing measures to improve consumer experience flying, such as improving airline on-time performance through regular reporting, technology investments to speed up security queues, and infrastructure investments in our regional airports.
'The Commerce Commission is looking at competition in airports, and I am considering whether there is any benefit in further moves around airfare transparency and further scrutiny on how to reduce the wider costs facing the aviation sector.'
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"I am frustrated that Sounds Air was unsuccessful in securing support from central government as regional connectivity is also important for economic growth, particularly tourism," she said. "There is often talk of the regions being our country's powerhouses - to be that we need infrastructure, services, and connectivity." Christchurch Hospital provided a lot of primary care for cancer patients, and Taylor had already been contacted by some of the patients who regularly used the service. "They're just sort of saying 'it's just such a devastating loss for them'. They're back to four or five hours on the road. They need family to transport them and take them rather than just dropping them at the airport," she said. South Island Minister James Meager. Photo: RNZ / Samuel Rillstone Wānaka local and Queenstown Lakes Deputy Mayor Quentin Smith was disappointed the service was being cut. So instead of being able to take a short flight that was less than an hour, it meant an hours-long drive. "The alternative of either driving, which is about five-and-a-half hours each way or going to Queenstown, where you've got to drive over an hour each way plus you've got to be there a lot earlier for your flights than you do for Sounds Air," he said. His daughter used the service a few weeks ago, and he said it was well used by travellers for business, holidays and appointments. It also presented a problem for healthcare, especially for people coming from Wānaka or Blenheim who need to travel to Christchurch Hospital for treatment. "Healthcare, I think, is a big one because people will fly up to Christchurch and back for a specialist appointment ... we know that access to healthcare out of Wānaka is particularly challenging so that's an issue that concerns me," Smith said. Smith remembered when Air New Zealand used to fly the same route before the service was cut more than a decade ago. "There's been a bit of a history of the offering and loss of this type of service. We've just got to find something that's sustainable that matches the needs. It was disappointing that a service that is really well-patronised isn't successful and there's obviously other reasons for that," he said. Christchurch Airport chief executive Justin Watson was sad to see the flights go. "A number of the regional airlines have been facing big challenges so ultimately it wasn't a complete surprise. We were hoping that they could work through those challenges and that they could find a way to continue to operate. But unfortunately they haven't been able to do that," he said. Both services carried about 10,000 passengers a year. Watson would like to see a collective approach to ensure the wings of important regional services were not clipped. "There's a reality there that says every region can't be connected or it's going to cost so much that people just won't fly on it because it's too expensive," he said. "In some countries, there is support through the likes of government for ensuring connectivity remains." South Island Minister James Meager said the government had already taken action in a variety of ways - including providing investment in regional airport infrastructure, commencing the release of regional on-time flight performance data - and would soon release an aviation action plan. He understood the conditions were tough in the aviation industry and airlines were under pressure - and that the government was actively considering several options to address regional connectivity concerns and improve competition in the sector. Destination Marlborough general manager Tracey Green said Christchurch was a key visitor market for Marlborough. "Recent challenges with Air New Zealand and ferry services have compromised our connectivity and losing Christchurch as a direct link is a significant blow," she said. "The full impact of this loss in connectivity may not be immediately clear, but it's a real shame this is happening just ahead of the summer season, when we rely on those connections the most," Green said. With a renewed focus on the Cook Strait services, Andrew Crawford said he was confident about the future of the business. "We are not alone in this, Air New Zealand and other regional carriers in New Zealand, and world-wide, have been hit by the same cost increases, and the irony is that our passenger demand has never been stronger," he said. "However, aviation is a very price sensitive market and demand would dry up if we tried to pass all of the cost increases to our customers."
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Two popular regional flights in the South Island are on the chopping block due to what is has been described as 'out of control' costs. Sounds Air will soon can its flights from Blenheim to Christchurch and Christchurch to Wanaka. It comes after the airline cancelled its services from Wellington to Taupo and Wellington to Westport last December, and sold an aircraft. It has been seen as not just a blow to hopes of boosting tourism but also for healthcare and those needing treatment at Christchurch Hospital. Tess Brunton reports. To embed this content on your own webpage, cut and paste the following: See terms of use.
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Sounds Air has announced further cuts in their regional routes meaning tourists jumping between spots in the South Island like Blenheim and Christchurch will first have to travel North to Wellington. From the 28th of September, Blenheim to Christchurch and Christchurch to Wanaka flights will stop. The company cites escalating costs like a 145% increase in the civil aviation authority levies and a weak New Zealand dollar among the reasons for the cutback. It means 10 staff will lose their job. Marlborough Mayor Nadine Taylor is worried about the impact it will have on the region, and spoke to Melissa Chan-Green. To embed this content on your own webpage, cut and paste the following: See terms of use.
