Jetstar reveals proposal to stop high-cost, loss-making regional flights from November

Wednesday, 25 September 2019

A Jetstar flight to Bali from Sydney was forced to turn back and land in Melbourne after pilots reportedly noticed cracks in the windshield.

Jetstar has revealed plans to stop its regional Q300 turboprop services to regional centres from the end of November.

The airline began flying to the regional centres in December 2015 and offers up to 130 return services a week during the peak season across five routes – Auckland and Nelson, Napier, New Plymouth and Palmerston North and flights between Nelson and Wellington.

The proposal does not affect Jetstar's New Zealand domestic and international jet services.

Gareth Evans, Jetstar's chief executive, said the proposal was based on the operation losing money, combined with higher costs and a softening of the regional travel market.

He said there was 'patchy' demand and the routes in question were 'thin'.

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'The New Zealand regional market is facing some headwinds, with softer demand and higher fuel costs and we don't see the outlook changing any time soon.

Jetstar has revealed plans to stop its regional Q300 turboprop services in New Zealand from the end of November.

'We have given it a real go. However, despite four years of hard work, including becoming the most on-time of the two major regional airlines and having high customer satisfaction, our regional network continues to be loss-making.'

He said the airline was not 'cutting and running'. 'We've given it four years.'

Up to 20,000 people were booked on Jetstar regional flights into the future and those scheduled after November 30 would be offered a refund. Air New Zealand is offering them a discount on replacement fares.

Brent Thomas, commercial director at House of Travel, said about 1000 people a day used the services.

He expected it could mean higher prices in future if Air New Zealand was left as the only operator.

'We know where there's competition that's good from a pricing perspective and also availability. The way an airline works is if the availability in a lower class of fare is not there they want you to go up to the next class but when there's more competition there's more choices. As soon as you take away one of two airlines … it's likely that the average price that is paid on those routes becomes more expensive.'

People who could not book well in advance would be most affected, he said.

A flight from Auckland to New Plymouth on October 8 is advertised at $91 on Jetstar at present. The cheapest Air New Zealand flight is $128. If a passenger wanted to return a week later, Jetstar offers a $68 flight – Air New Zealand's cheapest is $148.

Tukituki MP Lawrence Yule expressed disappointment.

'It's made a fundamental difference to travellers in Hawke's Bay, a lot more seats and a lot cheaper. While Air New Zealand has said they'll keep low fares into 2020, I think it's inevitable that fare will go up when there's no competition.'

John Milford, chief executive of Wellington's Business Central, said Jetstar's service of those routes had showed faith in the regions.

Brent Thomas, commercial director at House of Travel, says about 1000 people a day used the services.There would be people with existing bookings out to the middle of next year who would be affected.

'This proposal to cancel them shows the exact opposite.

'There is no doubt this will impact on tourism, business connectivity and leisure travel. These key Central New Zealand destinations will now miss out on the benefits of having had such a trusted player in the market - competition and choice, better access, lower fares and greater connectivity.'

Evans said the airline expected regional centres to be disappointed.

'Jetstar brought low fares and competition to the regions and we've carried more than 1.3 million passengers since these services began in 2015.

'Last year 25 per cent of our regional customers paid less than $50 for their flight and 75 per cent paid under $100.'

Benje Patterson, an economist and aviation commentator, said Jetstar had been quick to point to economic headwinds and higher jet fuel prices, 'but you could also argue that the smiling assassin, John Key, [who is on Air New Zealand's board] has struck again'.

'Air New Zealand's August operating statistics showed that its recent domestic growth has been coming from shorter regional flights,' he said.

'This trend was highlighted by the fact that passenger numbers rose, despite total passenger kilometres falling. Jetstar and Air New Zealand competed head-to-head on some of those regional services. Air New Zealand's regional demand growth has come at the expense of Jetstar.

'Predatory price cuts from Air New Zealand have boosted demand for its services. Jetstar has faced a squeezing of margins due to these lower ticket prices, which when coupled with a weaker demand outlook and prospect of higher fuel prices, has led to it pulling the pin.'

Patterson said Key and the rest of the Air New Zealand board would be pleased at the success of their regional pricing strategy.

'But the costs of this success might be borne long-term by consumers. Without the prospect of competition, regional flight price increases are an inevitable outcome on the horizon.'

The airline is starting a consultation process with about 70 affected employees on the proposal and expected to announce a final decision before the end of October.

Alternative employment options would be available for all affected Jetstar regional employees – made up chiefly of pilots and cabin crew – across Jetstar and Qantas Group businesses in New Zealand and Australia.