19 Jun 2006
May domestic passengers grew by 3.2% on last year, with a 9.8% growth in capacity. As a result, load factors were down marginally on last year. Whether lower response to seat growth is a response to economic conditions, less events based travel (Lions Tour) or a less stimulatory airline environment will only be revealed as the year progresses.
International passengers fell by 2.6% on a 2.7% fall in seats and load factors were the same as last year. This fall, while regrettable, is lower than we have seen in the period since November. We have been predicting for some time that passenger and seat growth would normalise as we reach anniversaries of signficant changes to route services. Part way through May, we reached the anniversary of Pacific Blue withdrawal from the Sydney route and as a result, passengers on the Sydney route declined by 4.9% on an 8% fall in seats (this compares with falls of between 20% and 25% for other months since May 2005). We have also now had twelve months of increases in capacity on the South East Queensland routes (Brisbane and Gold Coast), meaning that overall growth on those routes was -3%. The Melbourne route grew by 8% on last year.
The airline application for approval for a price fixing agreement on the Tasman has made little progress in New Zealand. Air New Zealand has reportedly said that the Minister of Transport (or as it turns out, her delegate) will not make a determination until after the ACCC in Australia has made its final decision. It is not clear whether this means that the Australian body, who does not have a mandate to protect Kiwi consumers, will in effect determine the fate of New Zealand travellers.
Certainly there has been no word from the Minister or the Ministry of Transport on whether it will conduct an open and rigorous process to test airline applications, it has not made a general invitation to interested parties to make submissions, and it has not advised the process or criteria it will use to consider the application. Nor has the Government disclosed what was discussed on 13 March when four Government Ministers (Finance, Tourism, Transport and Commerce) met with the Chairman and CEO of Air New Zealand on the code share application.
Qantas has said that it has a "Plan B" if the application is refused, as you would expect. Similarly, is seems very unlikely that the Board and Executive team of Air New Zealand would have pinned all their hopes on a proposal that is increasingly attracting opposition and seems bound to be subject to a protracted legal process. During the month, Wellington Airport obtained advice from Professor Michael Taggart, one of New Zealand's pre-eminent experts on public law. Professor Taggart advised that (a) the Minister's powers to approve the application are far more limited than the airlines suggest (b) There are significant parts of the agreement between Qantas and Air New Zealand that the Minister cannot approve and remain subject to the Commerce Act (c) The Minister must consider the public interest and competition impacts on consumers in making a decision. This contrasts starkly with the view put by airlines in their application, which suggests that the Minister has very limited discretion to reject the proposal, even if there are concerns about consumers. Professor Taggart's advice has been sent to the Minister and to the Commerce Commission.
In Australia, the ACCC has received numerous submissions, including seven from Wellington that express concern (WIAL, Wellington City Council, Wellington Regional Chamber of Commerce, Positively Wellington Tourism, Business Hutt Valley, New Zealand Hotel Council Wellington Branch and the Property Council Wellington Branch). Even some of those who appear sympathetic to the application, like the Australian Department of Transport and Regional Services, have canvassed the idea of excluding routes that have little competition, like Wellington, from the arrangement. Since then, Air New Zealand has publicly ruled out a compromise that excludes those routes, thus confirming that it is an "all or nothing" proposal.
In other developments during the month, leasing at the Airport Retail Park is now progressing strongly, with a number of stores likely to open this year, including Super Cheap Auto, Noel Leeming and others that are expected to be announced in the next month. Stage 1 of the international terminal project is progressing well, and it now appears likely that the new duty free concessionaire, Regency Duty Free, will be able to commence trading before Christmas (rather than mid 2007 as originally envisaged).
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