Sweet spot for budget-conscious travellers
The past year has been the best time to travel as unprecedented airline competition flew into the New Zealand market.
Air New Zealand chief executive Christopher Luxon said that while competition led to great ticket prices, it had probably hit high tide.
Luxon said eight new international carriers had entered the market in the past six months, and a further two would come by the end of June.
But he believed the country had most likely reached its peak for competition, bar a couple of players that might come in at the margin. Some, such as United Airlines, had also begun to moderate the supply of seats during the off-season.
‘‘I think it’s been the best time to be a traveller over the last 12 months, no doubt about it, and that competition has created a lot of those great prices in the marketplace. What I would say is I think that competition has reached a high-tide water mark. I think pricing is still in really good shape.’’
That had led to an oversupply of seats, which had meant a lot of price discounting. As a result Air New Zealand’s revenue fell 3 per cent.
But Luxon was happy with how the airline had digested that competition.
‘‘It is actually a really good result because it is in the face of unprecedented competition. That’s the most competition that’s ever entered New Zealand in 77 years of Air New Zealand’s existence.’’
The airline said yesterday its after-tax profit for the six months to December 31 was $256 million, down from $338m last year.
Before tax, earnings were the second highest for an interim period in the company’s history, which chairman Tony Carter said was impressive in the face of unprecedented competition.
Luxon said it had been able to absorb the competition by keeping costs down – helped by low fuel prices – and through its investment over the past four or five years, such that its fleet had an average age of seven years.
Without this investment, as well as $120m in new airport lounges, Air New Zealand would not have fared so well, he said. ‘‘It pays off in the tough times.’’
The domestic market had been a standout, he said, driven by a strong economy, the tourism boom, and by the number of events coming up such as the World Masters Games and the British & Irish Lions rugby tour.