Call for Commerce Commission to put NZ airfares under microscope

It is time the airline sector underwent the kind of market study that has been carried out in the grocery and banking sectors, Consumer New Zealand says.

From tomorrow, Air New Zealand will be increasing long-term domestic fares across all routes.

The airline said it had been absorbing cost increases of around 30 per cent, which could not continue.

Its half year profits fell in the first half of the year and it has forecast a bumpy second half too.

Consumer NZ chief executive Jon Duffy said while it was fair for travellers to question the price increases he believed they were justified, at least in part, due to higher fuel prices and wages.

"The problem we have is that we just don't know how far the price increases are justified and we think it's time for a bit more transparency in how airline travel in New Zealand is priced."

In other highly concentrated markets such as grocery and banking, the Commerce Commission had been called on to provide a market study.

While this took some time, it was the best way to establish all the factors affecting pricing and the level of competition and work out if travellers were getting a fair deal, he said.

Price controls would be "a contentious subject", however, with a lack of transparency doubts remained on whether the increases were fully justified.

There was a "a lot of mystery" attached to airline pricing, Duffy told Checkpoint.

Dynamic pricing — where fares could rise quickly as they got scarce close to departure time — alienated consumers, he said, although it was where Air New Zealand could make some steep margins.

"As consumers, we have really no visibility and ultimately there is a bit of a lack of trust and suspicion around how the algorithms that set these prices and indeed whether the scarcity that's advertised ... is genuine or not."

He added: "I think people don't like it because of a lack of transparency and that is an area that could be improved and and an area again that would benefit from a really good look by the Commerce Commission."

The commission would be able to delve into how it worked and the margin.

Consumer received a lot of complaints about Air New Zealand during the pandemic and even now the airline was "a frequent flyer" in terms of the businesses most complained about, he said.

Most consumers RNZ spoke to at Auckland International Airport opposed the move.

rnz.co.nz

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