19 Jun 2015

Jetstar's regional flights 'could be short-lived'

12:58 pm on 19 June 2015

Regional city councils are welcoming Jetstar's plans to expand but commentators are warning the joy could be short-lived.

Jetstar

Photo: 123rf

The Qantas-owned budget airline has announced it will fly to at least four more regional centres, using 50-seater planes.

Much-needed competition, more affordable fares and new jobs are just some of the benefits Jetstar said its expansion will bring.

The airline plans to start flying to four out of seven possible destinations that are primarily catered for by Air New Zealand.

On the shortlist are Hamilton, Rotorua, New Plymouth, Napier, Nelson, Palmerston North and Invercargill.

Hamilton's mayor Julie Hardaker said they had been waiting for a competitor to shake things up.

"We've been asking for this for a long long time so from Hamilton's point of view this is great news.

"We're one of New Zealand's biggest economies and there's a lot of business done in Hamilton and the Waikato," she said.

"So if we've got a better flight offering, more competition, that's going to be good for business travellers as well as visitors."

Spokesperson for Invercargill's economic development agency Venture Southland Bobbi Brown said the expansion will benefit the region's growing tourism industry.

"We've had probably one of the best seasons this year now that we've had ever and the trend looks like it's going to continue to grow so more flights, more flexibility, more options is only going to really help support the industry, business and the region in general."

Airports Association chief executive Kevin Ward said Jetstar's entry into regional routes has been heralded as a game changer.

Qantas Airways CEO Alan Joyce - speaking at the announcement of Jetstar's plan to expand regional flights in New Zealand.

Qantas Airways CEO Alan Joyce - speaking at the announcement of Jetstar's plan to expand regional flights. Photo: RNZ / Diego Opatowski

"It basically means that passengers will have choice, more timeframes and schedules to get to the bigger centres and there'll be competition in the pricing and if the pricing comes down, more people are likely to travel."

Tourism in the regions was also expected to be boosted by the addition of new flights.

Chief executive of the Tourism Industry Association Chris Roberts said more international visitors were arriving in New Zealand, but those using Jetstar's partner airlines found it harder to continue travelling throughout the country.

"With that growth in international tourism there is an need to spread the visitors around to get them out to all parts of New Zealand and having a second strong domestic network will certainly help in that regard."

The Mayor of Napier Bill Daltontaking warned against Jetstar the cream of the business and leaving the region worse off in the long term.

He said Air New Zealand has provided a great service, but flights are very expensive - up to $700 return to Auckland.

He said competition would drive the cost down, but there needed to be some caution.

"The danger is that they could come into the a region like Hawke's Bay and scavenge the seats from the 7 oclock to Auckland, the 7 o'clock flight to Wellington, and the 7pm flights back so that they erode the profitability of those flights."

Mr Dalton said they wanted competition, but did not want the frequency of flights cut.

Principle economist with the New Zealand Institute of Economic Research Shamubeel Eaqub said while consumers win in the short-term, small centres typically were not big enough to sustain one flight route, let alone two competitors.

"That is going to be very much the proof of the pudding, whether or not the lower prices generate sufficient demand so that these routes remain sustainable which will give them sustained access into other markets."

Aviation commentator Peter Clark said he has seen this story before.

"We've already seen the Qantas colours on regional New Zealand. We've seen Origin Pacific, we've seen Ansett New Zealand all on the regional markets, you know we've seen a lot of casualties," he said.

"There's only so many passengers you can carry out of these regions, regional infrastructure is expensive and it's hard to establish and to be able to offer frequency to these regions is going to be hard."

Mr Clark said Jetstar had the deep pockets of Qantas behind it and was also relying on community demand to support them.

The economic development agency for New Plymouth Taranaki Venture said competitive prices would not be enough.

Its chief executive Stuart Trundle said it welcomed investment but wanted a durable service.

"Are we talking about new destinations, are we talking about different timetables, because if all it's doing is going head to head with the incumbent service from Air New Zealand then that economic impact won't be that significant."

Jetstar will meet with airports, local government, business and tourism representatives before announcing its new destinations in September.

The first flights are due to start in December.

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