Airport’s tricky game
Is Christchurch Airport the rightful gateway to the splendour of the South Island still? What do Queenstown and Auckland have to say on the matter?
It is a complaint being heard around Christchurch. Following the earthquakes, Queenstown Airport snuck in and pinched a whole lot of tourist flights from the city.
And now our national carrier, Air New Zealand, is pushing a strategy of hubbing its long-haul international flights out of Auckland.
A huge civic investment has been made in the terminals and runways of Christchurch Airport in the belief it is the natural gateway to the spectacular scenery of the South Island.
But just as the Asian tourism bonanza is really kicking off, Christchurch risks being cut out of the picture. And that matters economically for the entire South Island.
According to Christchurch International Airport Ltd (CIAL) statistics, visitors arriving into New Zealand through Auckland Airport only spend 1.5 days down south on average. If they arrive direct to Christchurch, its 7.5 days.
Similarly, if Christchurch is the entry point, the South Island gets 80 per cent of the total visitor dollars spent, versus just 30 per cent when it is Auckland.
And the money gets spread about. The story is Queenstown does fine because it is receives a concentrated stream of travellers who arrive and leave without seeing much else. However, traffic through Christchurch drives the regions.
CIAL says for each dollar it earns, the South Island gains another $50 in turnover. The West Coast was down $150 million in tourist income in the first four years after Christchurch’s earthquakes because the airport was no longer feeding as many tourists into the general South Island pool.
So it is not hard to make a case that Auckland and Queenstown are winning at the expense of the greater good. And around Christchurch there have been plenty of murmurings.
Bruce Irvine, who retired last year as chair of Christchurch City Holdings, the manager of Christchurch City Council’s 75 per cent stake in the airport, recently told a public meeting the South Island deserves its own tourism strategy.
Irvine says what sticks with him is research carried out by a credit card company on the travel wishes of its premium customers.
‘‘They gave like 300 options. And what came up number one of where people wanted to go was the Grand Canyon. Number two was the Great Barrier Reef. And number three was the South Island of New Zealand.’’ The South Island, Irvine repeats pointedly.
Council’s finance spokesman, Cr Raf Manji, is another who complains that national strategies tend to become too Auckland-centric because of the political weight of its 1.5m voters.
He has noted how Auckland and Queenstown look to have an axis of alignment – how many Auckland corporate bosses now jet down to holiday homes in the lakes district?
The Mainland needs to be prepared to take its own view on how it develops its key industries like tourism.
So is there a case to answer? Did the earthquakes set Christchurch back in a way that has let others in? And is New Zealand leaving money on the table by not pipelining as much air traffic as possible through the city which is the South Island’s natural hub?
PLAYING THE AVIATION GAME
Up in CIAL’s boardroom, Malcolm Johns, the airport’s chief executive, agrees the aviation world is a bit of a Game of Thrones. Big investments being shuffled around an ever-changing board.
And CIAL has been promoting the figures showing that funnelling international traffic through Christchurch is the best way to spread the love around the South Island.
But Johns says he is relaxed with the idea that New Zealand prefers a free market, open skies, approach to the airline business.
He starts with the supposed Queenstown rivalry. The perception certainly exists. In 2010, Auckland International Airport swooped down to take a 25 per cent stake in Queenstown Airport. That felt personal to some.
And Queenstown is aiming high. It’s latest airport masterplan anticipates so much growth that by 2045, it expects to have to split the load with a new Wanaka airport.
Because it is hemmed in at Frankton, Queenstown will max out at 5m annual passenger movements and need Wanaka to cater for a further 2m.
Yet Johns says while Christchurch haemorrhaged tourist flights to Queenstown for several years after the earthquakes, that was just a business blip.
‘‘About 95 per cent of Queenstown’s growth was a simple transfer from Christchurch. The South Island traffic hadn’t actually grown.’’
Johns says the more telling figure is that since the China tourism boom did kick off in 2014, Christchurch has been
the faster growing airport by about 50 per cent. For every one international passenger Queenstown has added, Christchurch has added 1.52.
Then when it comes to Air NZ and the noise around its hubbing out of Auckland, Johns says CIAL simply has to put on its big boy pants.
Auckland was always going to come out top in a national carrier’s plans just due to its sheer weight of numbers. It has the biggest concentration of Kiwis wanting to fly abroad too.
And Air NZ has its eyes fixed on its own larger prizes. For instance, there is an opportunity to be the new stop-over city connecting the growing number of flights between Asia and South America.
The international airline map is being redrawn with China’s statesponsored airline fleet moving onto the world stage. This is putting the squeeze on the Gulf airlines – Emirates, Etihad and Qatar – who led the last wave of change.
In just the past few months, Air NZ has surprised people by breaking off an alliance with Virgin Australia to jump into bed with its supposed arch-rival, Qantas, in a cosy code-share arrangement bridging the Tasman market.
Johns says there are all sorts of industry realignments that are taking place way over the head of little old Christchurch Airport. And it is not in the national interest to play the kind of politics which would force Air NZ into making uncommercial decisions about how it deploys its aircraft.
‘‘Everyone here is in a long-term running race. Stopping Auckland Airport’s growth would be the equivalent of tripping the winner up.’’
So don’t whinge, but get on with it, is his business philosophy.
INSIDE THE CHINA SOUTHERN DEAL
Johns arrived at CIAL in 2014 with a reputation as a sharp cookie, having been boss of the Aucklandbased bus and ferry group, InterCity, and deputy chair of Tourism New Zealand.
But he also enjoys the advantage that, in being council-owned, Christchurch Airport has long been able to take a comparatively deep-pocketed approach to building its competitive position.
Johns talks about it in plumbing metaphors. Airports and airlines provide the infrastructure. The need is to lay large enough pipes to wherever the economic and social growth is likely to take place.
As a country, it is about removing any unwanted restrictions on the flows rather than having every city and region fighting to defend its personal patch.
Johns says this why the media often get it so wrong when it tries to track the industry in terms of apparent wins and losses – the ‘‘betrayal’’ if Air NZ cancels an international connection to Christchurch, or the celebrations when Christchurch gains anything at the expense of Auckland.
To see what it really going on, you have to think about the underlying logic of transport. What is efficient is a system of hubs and spokes. And that means the view out from a small airport like Christchurch is quite different from the view in.
Johns says in aviation jargon, Christchurch stands behind Air NZ as the national carrier. Its role is to be part of the domestic network channelling traffic into Air NZ’s international pipeline of long-haul, jets – the many tributaries feeding the mighty river.
‘‘Air NZ sits up in Auckland. And the South Island fills roughly two and a half triple-7s out of Auckland Airport every day.’’
But then Christchurch stands in front of the same hub-based networks of the other international airlines.
Take China Southern, for example. ‘‘If you are them, you are in Guangzhou looking out to the rest of the world. China Southern relies on its domestic network to feed all of China into Guangzhou and fire that out around the world.’’
So it is gaining direct tourist flights from those out-bound hubs which is the real prize for Christchurch Airport.
He explains by telling the inside tale of how CIAL did manage to seal a deal with China Southern in 2015.
Johns says China has its three fast-expanding airlines – Guangzhou-based China Southern, Shanghai-based China Eastern, and Beijing-based China Air.
These are volume providers looking to dominate the world’s major air routes. And as a destination, even a landscape jewel like the South Island is such a small market, so end of the line, that it barely counts as spare change in their thinking.
‘‘Very few airlines look at direct connections to airports outside the top 100 on the planet. And if you take China Southern, we are the 271st biggest destination they fly to, as well as the only city of under 1m people.’’
The fact a non-stop service now exists defies the very logic he has been talking about, Johns admits. So how did it happen?
Christchurch Airport had to make the airline’s business case for it. Find the passengers who would fill a plane. CIAL’s commercial development chief, Justin Watson, picks up the story.
Watson says everyone thinks about China in terms of its volume passengers – the classic coach parties who don’t in fact spend much. ‘‘We said let’s just park that group market.’’
Instead, CIAL searched for some market segment who would be the ideal customer. And the answer was professional middle-class Chinese females under 30, living in urban areas. Very specific.
Watson says the research shows they like to travel in groups of two or three. They like to drive themselves. And they put personal safety top of their list. So precisely all the boxes the South Island can tick.
‘‘We said this is the niche we want to go after. And of course in China, a niche like that is hundreds of millions of people.’’
Watson says a second niche also popped out – intergenerational travel. Wealthy Chinese families with grandparents and children in tow.
Again, the same values around independence and safety. But also this was a market segment with the money to travel business class. The young professional females would fly economy.
So front and back of the plane would be spoken for. And as such well-defined customers, it would be easy to find them with tailored marketing in China.
Johns says this is the way to take advantage of being a tiny player in a big world. Bespoke thinking. And the strategy has gone amazingly to plan.
‘‘Forty per cent of Chinese arrivals into Christchurch are those professional females under 30. The independent travellers that we’ve targeted are the highest value Chinese visitors coming into New Zealand now.’’
Johns says it was still a
daunting sell. Effectively China Southern had two new Boeing 787 Dreamliners to commit to a some long-haul route. ‘‘You are asking someone to make a decision on $500m worth of assets.’’
And Christchurch had competition. ‘‘There were four other cities the flights could have gone to. They could have gone to Rome, Istanbul, Egypt or Chicago.’’ You can imagine the sales junkets those other cities could lay on.
But Johns says the South Island pulled together. Christchurch Mayor Lianne Dalziel made three trips to China to forge a relationship. All the South Island mayors turned up for events like a dinner for China Southern executives held at a Hanmer Springs restaurant.
Johns says this official political support is key to the Chinese way of doing business. And combined with such a tight marketing plan, it worked.
Now it seems a routine fact that a Chinese giant is running a dedicated flight of top dollar tourists straight into the South Island most days of the week.
THE SOUTH ISLAND INC APPROACH
It is the collective approach that is paying off. Johns says the way the South Island mayors became personally involved in the China Southern bid helped demonstrate the Mainland could work together to increase business for everyone.
CIAL has also put money into a South Island marketing campaign designed to get international visitors heading to the smaller destinations like Nelson and Kaikoura.
This offers ‘‘China ready’’ education to small tourism operators. And it has established a connection to Chinese social media platforms like Alibaba, allowing for seamless travel bookings and internet payments.
Johns says the airport is doing what is needed to build tourism all around the South Island. An official Mainland tourism body might do that too. But it would be cumbersome compared to this commercially-based co-operation.
Even with Air NZ, the relationship is good because everyone understands their place in the aviation network, says Johns.
Again getting back to the hub dynamics, Johns says from CIAL’s point of view, Auckland Airport is just one of the four big transTasman hubs now – in business terms, on a par with Melbourne, Sydney and Brisbane.
So it is not a national rivalry between big brother and little brother. The Tasman market operates as a pool bringing in passengers from all directions.
‘‘We’re agnostic as to whether the hub is Auckland, Sydney, Brisbane or Melbourne, because what is certain is that 85 per cent of the flow of international visitors into and out of Christchurch is going to come through those four.’’
Johns adds that Air NZ is as ready to listen to smart business proposals as anyone else. Watson chips in to talk about another example.
Four years ago Air NZ started flights from Perth to Christchurch as CIAL identified there were enough holidaying Western Australia miners to fill the planes.
‘‘The miners were looking for a week off. And they had a lot of money to spend,’’ Watsons says.
Of course mining then went into recession and CIAL had to scramble to find a second market. ‘‘The target switched to become ‘silver surfers’ coming and doing a week’s campervanning.’’
And that is how it has to go, says Johns. The South Island is a worldclass tourist destination. But the local task is find the passengers who will guarantee to fill the planes.
Queenstown Mayor Jim Boult – who as it happens had Johns’ job before him, running CIAL from 2009 to 2013 – agrees it is more about being South Island partners than rivals.
Boult is quick to add people know where the actual jewels are. ‘‘I’m conscious of the fact Queenstown is the drawcard for most tourists who want to come to New Zealand.’’
But largely the two airports serve different markets. Queenstown has gained a lot of direct flights to Australia because it is the weekend party town, the winter ski resort town. Like Auckland, Sydney almost treats Queenstown as being in its backyard now.
Christchurch is where tourists start and finish their once-ina-lifetime road trips. So there is less direct over-lap.
And with the way tourism has exploded, the South Island problem is that it is drinking from a fire hydrant. Boult says the more pressing political concern is keeping up with the needed investment in hotels, tracks and bigger waste water treatment plants.
Summing up, Johns says Christchurch is doing fine. It still handles 58 per cent of all South Island passengers and 73 per cent of international arrivals. It has 85 per cent of South Island airfreight to boot.
If you want to feel sorry for someone, perhaps consider Canberra – a city of the same size with just 365 international flights a year compared to the 11,000 big planes passing through Christchurch.
Looked at that way, there isn’t too much to be concerned about, Johns says.