Close sidebar

Jetstar says its regional NZ services had annual losses of $20mln

written by WOFA | September 25, 2019
A file image of de Havilland Q300 VH-TQM in Jetstar livery in Auckland. (Andrew Aley)
A file image of de Havilland Q300 VH-TQM in Jetstar livery in Auckland. (Andrew Aley)

Jetstar group chief executive Gareth Evans says the Qantas-owned low-cost carrier (LCC) lost about $20 million on its regional New Zealand turboprop services in the past year, leaving the airline group little option but to call time on the four-year operation.

Regional services on five routes in New Zealand with Q300 turboprops are expected to end on November 30 2019, Jetstar announced on Wednesday, with consultation with about 70 staff underway.

Evans said there was no prospect of a material improvement in the regional turboprop operation, which began in 2015, in the forseeable future.

Advertisement
Advertisement

“We’ve had losses for a period of time and it doesn’t appear that those losses are going to mitigate going forward,” Evans told reporters in Auckland on Wednesday.

“We cannot see from where we stand today, any changes to the business conditions or the prospects of this part of the business in the medium to long term which is why we’ve made the decision that we’ve made.”

Evans described Jetstar’s Q300 operation as a “genuine attempt” to bring competition and low fares in these New Zealand regional markets.

And while the financial performance had “moved around over time”, the current circumstances were unlikely to change.

“We wanted to give it time and we have given it time but from where we stand today I think we’ve got to call time,” Evans said.

PROMOTED CONTENT

“We are not cutting and running, we’ve given it four years and that is a long time in anybody’s language.

“I think people will understand that you can’t run losses forever and so we’ve made this decision.”

Jetstar's first Q300 service in New Zealand was on December 1 2015. (Mike Millett)
Jetstar’s first Q300 service in New Zealand was on December 1 2015. (Mike Millett)

Evans said there were between 15,000 and 20,000 people with confirmed bookings after the proposed November 30 2019 end date. Those passengers would be offered a full refund, rebooking on alternative services or alternative dates on the Jetstar New Zealand network.

Also, Air New Zealand has made available special fares for passengers impacted by the withdrawal of those services.

The Q300s were operated on behalf of Jetstar by QantasLink’s Eastern Australia Airlines. Over the past four years, there were between three and five turboprops flying from Auckland to Napier, Nelson, New Plymouth and Palmerston North, as well as between Nelson and Wellington.

Those aircraft will now be return to Australia and redeployed on the QantasLink network.

Jetstar’s proposed withdrawal from those five regional routes was also raised by shareholders at the Air New Zealand annual general meeting in Auckland on Wednesday.

Outgoing Air New Zealand chief executive Christopher Luxon said in response to a question the Jetstar decision highlighted the challenges faced by airlines on these sorts of thin regional routes.

“What this does underscore is how difficult it is flying in regional New Zealand,” Luxon said, adding that the regional economics of flying was “really tough”.

“People often have the misconception that because they’re small aircraft they must be much cheaper but on a cost per seat basis they are often much more expensive than our jet aircraft because you have less people on board covering the costs of flying.

“We had to do quite a drastic reset back in 2014 because on 15 of the destinations we flew to we lost $NZ52 on every customer flying them there.”

Air New Zealand said in a statement on Wednesday it would keep its lowest lead-in fares on the affected routes at current levels until the end of 2020, subject to fuel prices remaining stable.

That meant $39 one-way fares for Napier and New Plymouth to Auckland, and $49 for Aukland to Nelson and Palmerston North.

Further, he said the airline would consider adding capacity into those regions with midday or non-peak flying.

A screenshot of chief executive Christopher Luxon at the Air New Zealand annual general meeting. (Air New Zealand webcast)

Luxon said New Zealand was very lucky with 85 per cent of its towns with populations of 20,000 people or more having scheduled air services. The next best was Australia, with 56 per cent of towns of 20,000 people or more having scheduled services.

“Despite some of the critics we have had, Air New Zealand has been growing our regions by two to three times the rate of GDP growth over the last five to six years. We’re there for the long run,” Luxon said.

Also, Luxon said Air New Zealand had been working with smaller airlines such as Air Chathams and Sounds Air to co-ordinate services into the regions, as well as working on interline agreements to allow baggage transfers and smoother connections.

He said some technology investment was needed to enable the arrangement but talks were well advanced “for some good link up over time.”

7 Comments

  • There is a big lesson in this for Virgin Australia. If a route or a group of routes can’t make money then man up and cancel the excercise and use the assets on routes that can be shown to be making money.
    Surprised Qantas/ Jetstar took 4 years to come to the decision.
    Regional Australia will be the winner as Qantas group redeploy the assets onto existing profitable routes to provide more frequency/seats.
    Virgin by now should have announced the routes being rationalised and the downsizing of the Bowen Hills Head Office. good intentions without action never saved an airline that is bleeding so badly.

  • john

    says:

    Great news for Air Chathams. They just need more aircraft. Air nz will push up fares on the regional routes they want to keep.

    • Chris

      says:

      Air NZ has said that it will not change regional fares until 2020, so regional fares from NZ$39.00 (seat only) one way will stay as regional air travel is still soft.

      With regards to Air Chathams, they are the up and coming 2nd level regional airline and they wont compete with Air NZ, as they have a good relationship with them. Air Chathams is already looking at the possibility of re-starting the Hamilton to Nelson route and Auckland to Masterton route once Masterton airport has been upgraded for Metroliners and SAAB 340’s

      • Adrian

        says:

        They have an interline agreement with Air NZ. Therefore, they will be happy to take crumbs from the table only, which they are currently doing and doing well.

  • Peter Ritty

    says:

    Understandable. You can only lose so much.

  • Phil

    says:

    It doesn’t surprise me considering qantas now has a codeshare agreement with Air NZ.

  • QFLink Fan

    says:

    I wonder if this will lead to new routes for QF Link in Australia. Burnie (Tas) is screaming out for competition from the eye watering fares that Rex charge! Also Launceston (Tas) is screaming out for more flights – the current schedule of 4 flights a day but QF Link keeps saying they don’t have the extra aircraft to put on this route.
    Any news @AustralianAviation where these planes are going to be deployed?

Leave a Comment

Your email address will not be published. Required fields are marked *

Each day, our subscribers are more informed with the right information.

SIGN UP to the Australian Aviation magazine for high-quality news and features for just $99.95 per year