Consumer NZ Urges Government To Get Domestic Aviation Market Study Off The Ground

Consumer NZ has written to the Minister of Commerce and Consumer Affairs, urging him to direct the Commerce Commission to undertake a market study into New Zealand’s aviation sector.

Jon Duffy, Consumer NZ CEO, says in sectors where any single company holds a significantly high market share, such as Air New Zealand, which holds an 86% share, there is a risk competition isn't working as it should to keep prices reasonable.

In particular, the advocacy organisation is concerned by the findings of its own research into Air New Zealand’s use of dynamic pricing.

Duffy says a market study would determine to what extent Air New Zealand may be taking advantage of its virtual monopoly.

“For many New Zealanders, there’s Air New Zealand or nothing – and high fares are affecting our regions.

“Our research has identified numerous red flags affecting competition in the sector that must be put under the microscope to assure consumers the cost of flying in New Zealand is truly fair.”

In addition to the limited choice New Zealanders have when it comes to air travel, Consumer is concerned high barriers to entry reduce the likelihood that other carriers will enter the market to compete with Air New Zealand.

Duffy also points out the government is a 51% shareholder in Air New Zealand but believes that there is no one holding the national carrier to account.

“We understand Air New Zealand is facing its own set of challenges, like constrained fleet availability and increasing costs in some areas.

“Our concern remains – New Zealand has the most concentrated domestic aviation market in the world¹, so when Air New Zealand says its pricing is fair, we are forced to take their word for it. A market study would tell us whether we can rely on what we’re being told.

“A Commerce Commission market study won’t solve anti-competitive behaviour, but getting information about how competition is working in the sector will highlight what interventions may be necessary and provide confidence New Zealanders aren’t being ripped off.”

Note:

¹ Sabre Market Intelligence for the 2023 calendar year for domestic markets with more than 5 million seats operated by airlines. New Zealand has the most concentrated domestic aviation market in the world with one airline holding 86% of seats in the market.

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