March 11, 2026 • 24 mins
Air New Zealand is set to cut 1100 flights – affecting about 44,000 customers.
CEO Nikhil Ravishankar has cited “unprecedented” jet fuel prices as the cause – which he said could not be passed on to customers, who were already facing cost-of-living challenges.
A normal price for jet fuel is about US$85 a barrel -- but the product is now at about US$170 a barrel as a result of the war in Iran.
It’s all prompted the Government to round up a bunch of senior ministers to oversee the country’s fuel security.
Today on The Front Page, aviation journalist Grant Bradley is with us to take a look at the current situation, and crises past – and whether air travel will ever be the same.
Follow The Front Page on iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts.
You can read more about this and other stories in the New Zealand Herald, online at nzherald.co.nz, or tune in to news bulletins across the NZME network.
Host: Chelsea Daniels
Editor/Producer: Richard Martin
Producer: Jane Yee
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Episode Transcript
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Speaker 1 (00:05):
Kyota.
Speaker 2 (00:06):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by the New Zealand Herald in New
Zealand is set to cut eleven hundred flights, affecting about
forty four thousand customers. CEO Nikhil Ravashanka has cited unprecedented
(00:27):
jet fuel prices as the cause, which he said could
not be passed on to customers who were already facing
cost of living challenges. A normal price for jet fuel
is about US eighty five dollars a barrel, but the
product is now at about one hundred and seventy dollars
US a barrel as a result of the war in Iran.
(00:48):
It's all prompted the government to round up a bunch
of senior ministers to oversee the country's fuel security. Today
on the Front Page, aviation journalist Grant Bradley is with
us to take a look at the current situation and
crises passed and whether air travel will ever be the same. So, Grant,
(01:10):
we're hearing a lot about jet fuel prices and how
it's affecting airlines globally. We've been told not to panic.
Should we panic?
Speaker 1 (01:20):
Look, we're facing an immediate price search.
Speaker 3 (01:27):
Nine.
Speaker 1 (01:28):
If you've already bought your ticket, you're not going to
be paying more. If you are looking to travel a
little bit further down the track, well yeah, you are
going to be paying a bit more. But this is
an event that comes around in aviation. Say on average
every seven years there's a geopolitical event, a health emergency
(01:51):
that will affect airlines adversely, and by extension passengers. These
things become a little bit more frequently than that these days,
but these are the kind of things that airlines plan for,
and planes are going to keep on flying people. As
(02:12):
we learned after the pandemic, there's this very strong desire
to get places. It's an unstoppable need to connect. And
so I always figured that the airline industry is populated
by bioptimists, and they always look ahead and they find
(02:36):
a way.
Speaker 2 (02:37):
Well, you wouldn't want to be a CEO in an
airline if you didn't have that sunny disposition, I suppose,
because you'd be quite down all the time, wouldn't you.
Speaker 1 (02:45):
Yeah, Well that's right. It's these are kind of jobs
for the fainthearted. And well we saw this with the
previous in New Zealand. CEO Greg Flauran. He started work
the just about the day they started canceling flights as
a result of COVID, and that was his introduction to airlines.
(03:07):
Nicole Rubashanka, he's also having a baptism of fire for
different reasons, and so he's moved into the top job
at their New Zealand at a time when it's facing
a world of pain. In a way, even before this
jet fuel crisis, so what he in New Zealand was
(03:30):
facing has been fairly well rehearsed, but with rising costs,
strong competition on some key routes, and particularly a shortage
of aircraft, and so they came into this event not
in great shape. Their first half loss of fifty nine
(03:53):
million dollars looks even before this was on track to
getting worse for the fully. So in a way, this
is another kick in the guts very air New Zealand,
in particular at a time when some of its peers
we're doing particularly well. You look across the Tasman quantus
around about a one point five billion dollar profit for
(04:17):
the first year, so other airlines been doing a lot
better than a New Zealand because they've got they weren't
a better place operationally.
Speaker 2 (04:27):
Have we ever just like simply run out of jet fuel.
Speaker 1 (04:31):
There's been supply problems before, but you know, you go
back to the Iran Iraq War, the Straits of the Moose.
We were targeted then all oil and short supply. There's
been specific events that have led to jet fuel problems,
and especially in New Zealand with pipelines breaking and so forth,
(04:53):
but globally there's always been a bit of gas in
the tank. With this current event, it's jet fuel. It's
particularly the hardest. I've seen a figure that while about
twenty percent of crude oil goes through the Straits of Amos,
which are under fire at the moment, it's around but
(05:16):
forty percent for jet fuel for European and customers in
other parts of the world. So jet fuel is spiking
particularly dramatically at this stage. It's all about the refiner's margin,
(05:36):
and those margins have bln out like nothing before. We've
seen these oil price spikes before, but nothing like this
jet fuel.
Speaker 2 (05:46):
I've seen that the IA has agreed to the largest
ever oil stock release, so they'll be releasing four hundred
million barrels of oil from strategic reserves, and that will
contribute through jet fuel pressures. Where would you place the
seriousness of this jet fuel crisis and situation if we
(06:08):
were to look at similar disruptions. I'm thinking like COVID
for example, of course, but also like the GFC nine
to eleven even you would have been reporting during that.
Speaker 1 (06:18):
Yeah, that's right. Well, nine to eleven was very much
a short, very sharp shock to the especially in the
biggest aviation market in the world in America, and there
were real fears there that people would be reluctant to
chump on planes. After that, it didn't take long to recover.
(06:39):
It took a matter of weeks to months, and even
in America. And then after that we had an Asian
health crisis SARS again, Asian airlines affected by that, some
fears that it was going to become a pandemic. It
didn't and demand recover and yeah, you're right the identify
(07:04):
the GFC. Interestingly, just before the GFC, oil spiked to
well over one hundred dollars a barrel, and so on
real terms, a lot higher than today. Airlines kept on
flying and then in a way the world was held
(07:24):
by a very sharp recession the GFC itself. So we
saw prices taper off. There's been volcanoes in Iceland, volcanoes
in the middle of the North Island here in New Zealand.
And then you know, the biggest of them all, of course,
was COVID. And that was not an operational or or
(07:48):
a supply problem cost problem. It was a demand problem.
People weren't allowed to fly or they most certainly didn't
want to. And this was sitting here in New Zealand.
It looked existential for the airline industry. But you know,
being what it is, as soon as border has opened,
(08:09):
airlines they've got planes they need to fly, and people
realize the value of connecting. And so the recovery from
COVID by all airlines was phenomenal, and you know, for
a lot of the turban is quite unexpected just how
strong that was in New Zealand went on to make
(08:30):
a second biggest profit and necessary and other airlines have
just thrived. So this one, well, you know, who knows.
It's up to the President of the United States. I
guess as to where this goes. It's very unclear about
(08:50):
what the aim is. There's plenty of arguments about the
wisdom of what he's done, but will be up to
him to a certain extent. And then, of course, you know,
as everyone's learned the Iranian response, whether it's a I think,
(09:13):
whenever you see the word cease fire following this, it's
going to be always prefaced with the other word fragile,
and that will really mean something in this case. So
there'll be nervousness about the Middle East and supply of
oil for the rest of the world for quite some time.
(09:35):
And the other part of that is, of course, what's
going to do to global economy, So we're looking at
a global recession, and again that will impact demand for
flying around the place, as even though people don't feel
the need to fly, it is to an extent discretionary
(09:59):
and if they're really feeling in the pocket, they won't
and that means the alliance will pull back, and that's
that's not good favorite one for anyone. Are you looking
at more significant cuts two roots in the medium to long.
Speaker 3 (10:17):
Term, It's it's hard to say ran they're possible. The
situation is very volatile at you know, the at one
hundred and seventy dollars mark. Maybe it's worth giving you
a bit of a sense of what normal looks like right,
So jet fuel price anywhere between eighty to ninety dollars
should be seen as being normal. And to give it
(10:39):
put it in context, we track fuel cost to two
decimal points, so every cent matters in this game.
Speaker 1 (10:46):
So had seventy is waco.
Speaker 3 (10:48):
I mean, it's unprecedented.
Speaker 2 (10:51):
I'm going to say this word and I hate saying
this word, but unprecedented. People are saying that this is unprecedented.
But COVID was unprecedented, right, And like you Si Rite,
he said it was a demand issue versus a jet
fuel issue. Would you do you reckon that demand out
like as a situation, as a crisis, would outweigh a
(11:13):
shortage of jet fuel? And if so, if that is
the case, then it's quite a good thing that they
airlines bounced back after COVID, because that kind of shows
us the resilience of the industry.
Speaker 1 (11:24):
Look, both can be managed to a certain extent. You know,
as we're seeing with you in New Zealand, they're pulling
back on flying and so they're not needing the same
inputs for you know, to a certain degree, there's fuel
costs around the margins, and so what they're putting into
the businesses they can control that. The airlines have got
(11:49):
a little less control over demand, you know, with macroeconomic
factors affecting people's wallets. However, they can certainly stimulate demand
by putting on better pricing, putting on new routes, and
basically more capacity. Other parts of the world saw a
(12:11):
lot more of that post COVID. It didn't happen so much. Here.
We're not back to the same levels of long walk
con activity as we were in twenty nineteen. But yeah,
be that as it may. The again, this will all
depend on the duration of this of this current crisis,
(12:35):
and who can know what's inside Donald Trump's here.
Speaker 2 (12:42):
Well, speaking of prices, I mean, we had a New
Zealand their results obviously abysmal. Then we had, you know,
this morning, the news of eleven hundred flights being canceled
up until May, and then also in New Zealand announced
this week it would lift the cost of its domestic
flights by ten dollars, short haul international by twenty and
(13:05):
long haul by ninety. That's in response to the surge
and jet fuel crisis. But in terms of I mean,
you can't just keep adding on more money to flights,
right there has to be an end to that.
Speaker 1 (13:19):
You know, airlines will test the market, they'll know where
the elasticity is in terms of consumers' ability to pay
for something. New Zealand was definitely feeling that, or has
been for over the last year or so domestic weakness,
so it would have been loathed to put up those feares.
And of course they get hammered on regional routes in
(13:41):
public forum for US for those high regional costs. On
international routes where they have about forty percent of the
traffic coming out of New Zealand, they can drive the
accept price with a little more comfort. Interestingly, and winners
(14:02):
and losers game at the moment. Of course, their flights
to the United States and then with partners on to
Europe would be pretty foot now because folks aren't going
through the Middle East, and so airlines that can offer
(14:24):
an alternative route to Europe doing particularly well. So we're
seeing Singapore Airlines, CAFA Pacific, the mainland Chinese carriers and
then of course the New Zealand corners going through the States.
Speaker 2 (14:38):
I saw a stat this week actually Grant and New
Zealand is apparently booked over a thousand people from Australia
and New Zealand to Europe. Of it last week and
last year they booked less than one a day, so
that really, I mean, it's not stopping people going to
Europe for their European holidays, but it's just how many routes,
so how many how many different ways are there to
(14:59):
get to Europe from New Zealand.
Speaker 1 (15:01):
You can't fly their NonStop at the moment. I had
it from a travel agent last week that you know,
maybe about eight percent of their business would go through
the Middle East, and so that's Qatar and Dubai so
to a large extent, even though Emirates are still flying,
(15:21):
a lot of people have been discouraged from taking those
flights for have rebooked, canceled and got a refund or
rebuilt for further out. So Middle East is a little
off the agenda at the moment, and there's certainly the
Ministry of Foreign Affairs and Trades advices do not travel
and you're going to have trouble getting insurance going through there.
(15:42):
So yeah, so you're asking about the other ways to
get there, well, to Singapore then on to Europe. Singplere
Airlines got pretty good network into Europe KFA Pacific through
Hong Kong and the mainland Chinese carriers will be doing
well out of it because they were of from recently comparedive
fears already, so all of a sudden they're back on
(16:07):
in the equation. And then the other main way of
getting to Europe would be through the United States, and
that's mainly with the New Zealand through San Francisco, La Houston,
New York, and then of course Quantus does in New
York as well.
Speaker 2 (16:24):
I saw that the Air New Zealand CEO was pretty
quick to point out that flights to the Pacific and
to regional destinations, so like your Hockiteca, Timado and Topoor,
they were less likely to be impacted by this. How
important is this foreign airline because you and I both
know that as soon as a flight to you know,
Auckland to Todong is disrupted, it does make headlines.
Speaker 1 (16:47):
Yeah, well that's right. Well, you know, any disruption and
a network is going to have knock on effects. In
New Zealand's under political pressure to retain its regional network
here and NEC in it you know, flies to twenty
places around the country. There's a big political imperative to
(17:08):
retain that network properly in New Zealander is that those
flights are fairly costly to operate. In a lot of cases,
the smaller planes that they operate to the very smallest
town's pretty old. They're you know, the Q three hundreds
are around about twenty years old on average and may
have to fly well into next decades. So not as
(17:31):
reliable as in New Zealand would like, and as I say,
not as efficient as a brand new plane. There's no
replacement plane for that aircraft size on the horizon either,
So the regional networks a challenge. And yeah, you mentioned
the Pacific Islands there, Well, you know, there's there's a
(17:54):
big obligation that in New Zealand fields here to keep
connected to the Pacific Islands for friends and family her visits.
As I understand, the.
Speaker 4 (18:11):
Current review of her flights for the next six weeks
may involve some Pacific Island services, but not many.
Speaker 1 (18:23):
I think they're looking at Bali as a as perhaps
one an international service that might take a bit of
a trimble or more of a consolidation.
Speaker 2 (18:32):
Yeah, I saw a few days ago the chief executive
of Air Chathams actually told aren Z that the rising
cost of oil is costing them about one hundred and
forty thousand dollars extra a month in fuel to your knowledge,
how much generally would you say the airlines account for
or budget for in their kind of modeling in terms
(18:54):
of that, Because one hundred and forty thousand dollars, you know,
I can't spare that next month. But how much generally
how much buffer do they give themselves?
Speaker 1 (19:04):
Look not much. Airlines are very thin margin businesses, high volume,
thin margin. You know, there's often a statistic that comes
out annually that across the globe, you know, airlines either
making the price of a cup of coffee on every
passenger the price of a you know, and then the
(19:24):
next year might be a bit better any airport sandwich.
So things have to go pretty right most of the
time to be profitable. And so airlines can can burn
money pretty quickly just as they can earn it just
as just as quickly. So I think a foresight bars
looked at the air U Zealand's current problem and they
(19:49):
estimate it will cost some another four to five million
dollars a day. So they're they're big used as a fuel.
It's there alongside labor, it's said experience.
Speaker 5 (20:07):
The reality is there's huge volatility in these markets and
this will put pressure on in New Zealand that ultimately,
you know, we want to make sure that you know
as a government we're doing everything we can to be
able to respond. That's why Nicola Willis has put in
place a minister or group looking at how we do
respond and to be seeing what if there are things
(20:30):
the government can do to stuften the impacts here in
New Zealand looking at what those.
Speaker 1 (20:34):
Are, including a cash injection for in New Zealand.
Speaker 2 (20:37):
Would you consider that?
Speaker 5 (20:38):
Oh, look, that's not that's not something I think the
minister's considering at this stage. I think the reality is
in New Zealand has to has to weather through, whether
weather the storm.
Speaker 2 (20:49):
Just lastly, I mean we talk about these jet fuel situations,
like you said, about every seven years. It's getting to
be a little bit more common. Now. Are there any
things over the years or ideas that they've come up
with recommendations rather saying look we need to do this now,
say for instance, increase fuel storage in New Zealand or
(21:11):
at Auckland Airport or something. Is there anything that just
comes up time and time again where you're sitting there
scratching your head like why has this not happened yet?
Speaker 1 (21:19):
What you always see during these times is renewed focus
on alternative ways to propel planes, so different types of fuel.
Two thousand and eight, when jet fuel prices really spiked,
it's huge enthusiasm for sustainable aviation fuel SAD as they
(21:40):
call it. People try to make it out all sorts
of things, nuts from jetropha trees, and there was mustard,
seeds andes, the technology works airlines wanted. But then the
fuel price drops and that real momentum for change ebbs
(22:04):
as well. Since then, again, you know, work's been going
on in the technology, feedstocks, plant matter, used oil. It's there,
but there hasn't been the financial incentive for refiners and
producers to make a lot of it. So at the moment,
(22:25):
staff is literally a drop in the bucket for airlines.
But you know, anything that can wing airlines off fossil
fuels has got to be a good thing in the
in the medium to long term. It's just a matter
of producers getting on board and making a lot of
it well.
Speaker 2 (22:45):
And New Zealand brought a whole bunch from was it
San Francisco. They got it from, Yeah.
Speaker 1 (22:49):
They've They've got it in from a range of places,
and yeah, they they're acutely where that they have to
fuel to proof flying for in the long term. And
it's good for the planet. But these airlines always think
(23:10):
about their balance sheet as well. They kind of know
that it makes financial sense. I expect to see a
resurgence of interest and well, what happens when oil stops flying?
What's the alternative? It's there, but can it be Producer.
Speaker 2 (23:30):
Scale, thanks for joining us, Grant pleasure, thanks for having me.
That's it for this episode of The Front Page. You
can read more about today's stories and extensive news coverage
at enzidhrald dot co dot nz. The Front Page is
hosted and produced by me Chelsea Daniels Caine. Dicky is
(23:51):
our studio operator, Richard Martin, our producer and editor, and
our executive producer is Jane Ye. Follow the Front Page
on the heart app or wherever you get your podcasts,
and join us next time for another look beyond the headlines.
Kyota.
Speaker 2 (00:06):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by the New Zealand Herald in New
Zealand is set to cut eleven hundred flights, affecting about
forty four thousand customers. CEO Nikhil Ravashanka has cited unprecedented
(00:27):
jet fuel prices as the cause, which he said could
not be passed on to customers who were already facing
cost of living challenges. A normal price for jet fuel
is about US eighty five dollars a barrel, but the
product is now at about one hundred and seventy dollars
US a barrel as a result of the war in Iran.
(00:48):
It's all prompted the government to round up a bunch
of senior ministers to oversee the country's fuel security. Today
on the Front Page, aviation journalist Grant Bradley is with
us to take a look at the current situation and
crises passed and whether air travel will ever be the same. So, Grant,
(01:10):
we're hearing a lot about jet fuel prices and how
it's affecting airlines globally. We've been told not to panic.
Should we panic?
Speaker 1 (01:20):
Look, we're facing an immediate price search.
Speaker 3 (01:27):
Nine.
Speaker 1 (01:28):
If you've already bought your ticket, you're not going to
be paying more. If you are looking to travel a
little bit further down the track, well yeah, you are
going to be paying a bit more. But this is
an event that comes around in aviation. Say on average
every seven years there's a geopolitical event, a health emergency
(01:51):
that will affect airlines adversely, and by extension passengers. These
things become a little bit more frequently than that these days,
but these are the kind of things that airlines plan for,
and planes are going to keep on flying people. As
(02:12):
we learned after the pandemic, there's this very strong desire
to get places. It's an unstoppable need to connect. And
so I always figured that the airline industry is populated
by bioptimists, and they always look ahead and they find
(02:36):
a way.
Speaker 2 (02:37):
Well, you wouldn't want to be a CEO in an
airline if you didn't have that sunny disposition, I suppose,
because you'd be quite down all the time, wouldn't you.
Speaker 1 (02:45):
Yeah, Well that's right. It's these are kind of jobs
for the fainthearted. And well we saw this with the
previous in New Zealand. CEO Greg Flauran. He started work
the just about the day they started canceling flights as
a result of COVID, and that was his introduction to airlines.
(03:07):
Nicole Rubashanka, he's also having a baptism of fire for
different reasons, and so he's moved into the top job
at their New Zealand at a time when it's facing
a world of pain. In a way, even before this
jet fuel crisis, so what he in New Zealand was
(03:30):
facing has been fairly well rehearsed, but with rising costs,
strong competition on some key routes, and particularly a shortage
of aircraft, and so they came into this event not
in great shape. Their first half loss of fifty nine
(03:53):
million dollars looks even before this was on track to
getting worse for the fully. So in a way, this
is another kick in the guts very air New Zealand,
in particular at a time when some of its peers
we're doing particularly well. You look across the Tasman quantus
around about a one point five billion dollar profit for
(04:17):
the first year, so other airlines been doing a lot
better than a New Zealand because they've got they weren't
a better place operationally.
Speaker 2 (04:27):
Have we ever just like simply run out of jet fuel.
Speaker 1 (04:31):
There's been supply problems before, but you know, you go
back to the Iran Iraq War, the Straits of the Moose.
We were targeted then all oil and short supply. There's
been specific events that have led to jet fuel problems,
and especially in New Zealand with pipelines breaking and so forth,
(04:53):
but globally there's always been a bit of gas in
the tank. With this current event, it's jet fuel. It's
particularly the hardest. I've seen a figure that while about
twenty percent of crude oil goes through the Straits of Amos,
which are under fire at the moment, it's around but
(05:16):
forty percent for jet fuel for European and customers in
other parts of the world. So jet fuel is spiking
particularly dramatically at this stage. It's all about the refiner's margin,
(05:36):
and those margins have bln out like nothing before. We've
seen these oil price spikes before, but nothing like this
jet fuel.
Speaker 2 (05:46):
I've seen that the IA has agreed to the largest
ever oil stock release, so they'll be releasing four hundred
million barrels of oil from strategic reserves, and that will
contribute through jet fuel pressures. Where would you place the
seriousness of this jet fuel crisis and situation if we
(06:08):
were to look at similar disruptions. I'm thinking like COVID
for example, of course, but also like the GFC nine
to eleven even you would have been reporting during that.
Speaker 1 (06:18):
Yeah, that's right. Well, nine to eleven was very much
a short, very sharp shock to the especially in the
biggest aviation market in the world in America, and there
were real fears there that people would be reluctant to
chump on planes. After that, it didn't take long to recover.
(06:39):
It took a matter of weeks to months, and even
in America. And then after that we had an Asian
health crisis SARS again, Asian airlines affected by that, some
fears that it was going to become a pandemic. It
didn't and demand recover and yeah, you're right the identify
(07:04):
the GFC. Interestingly, just before the GFC, oil spiked to
well over one hundred dollars a barrel, and so on
real terms, a lot higher than today. Airlines kept on
flying and then in a way the world was held
(07:24):
by a very sharp recession the GFC itself. So we
saw prices taper off. There's been volcanoes in Iceland, volcanoes
in the middle of the North Island here in New Zealand.
And then you know, the biggest of them all, of course,
was COVID. And that was not an operational or or
(07:48):
a supply problem cost problem. It was a demand problem.
People weren't allowed to fly or they most certainly didn't
want to. And this was sitting here in New Zealand.
It looked existential for the airline industry. But you know,
being what it is, as soon as border has opened,
(08:09):
airlines they've got planes they need to fly, and people
realize the value of connecting. And so the recovery from
COVID by all airlines was phenomenal, and you know, for
a lot of the turban is quite unexpected just how
strong that was in New Zealand went on to make
(08:30):
a second biggest profit and necessary and other airlines have
just thrived. So this one, well, you know, who knows.
It's up to the President of the United States. I
guess as to where this goes. It's very unclear about
(08:50):
what the aim is. There's plenty of arguments about the
wisdom of what he's done, but will be up to
him to a certain extent. And then, of course, you know,
as everyone's learned the Iranian response, whether it's a I think,
(09:13):
whenever you see the word cease fire following this, it's
going to be always prefaced with the other word fragile,
and that will really mean something in this case. So
there'll be nervousness about the Middle East and supply of
oil for the rest of the world for quite some time.
(09:35):
And the other part of that is, of course, what's
going to do to global economy, So we're looking at
a global recession, and again that will impact demand for
flying around the place, as even though people don't feel
the need to fly, it is to an extent discretionary
(09:59):
and if they're really feeling in the pocket, they won't
and that means the alliance will pull back, and that's
that's not good favorite one for anyone. Are you looking
at more significant cuts two roots in the medium to long.
Speaker 3 (10:17):
Term, It's it's hard to say ran they're possible. The
situation is very volatile at you know, the at one
hundred and seventy dollars mark. Maybe it's worth giving you
a bit of a sense of what normal looks like right,
So jet fuel price anywhere between eighty to ninety dollars
should be seen as being normal. And to give it
(10:39):
put it in context, we track fuel cost to two
decimal points, so every cent matters in this game.
Speaker 1 (10:46):
So had seventy is waco.
Speaker 3 (10:48):
I mean, it's unprecedented.
Speaker 2 (10:51):
I'm going to say this word and I hate saying
this word, but unprecedented. People are saying that this is unprecedented.
But COVID was unprecedented, right, And like you Si Rite,
he said it was a demand issue versus a jet
fuel issue. Would you do you reckon that demand out
like as a situation, as a crisis, would outweigh a
(11:13):
shortage of jet fuel? And if so, if that is
the case, then it's quite a good thing that they
airlines bounced back after COVID, because that kind of shows
us the resilience of the industry.
Speaker 1 (11:24):
Look, both can be managed to a certain extent. You know,
as we're seeing with you in New Zealand, they're pulling
back on flying and so they're not needing the same
inputs for you know, to a certain degree, there's fuel
costs around the margins, and so what they're putting into
the businesses they can control that. The airlines have got
(11:49):
a little less control over demand, you know, with macroeconomic
factors affecting people's wallets. However, they can certainly stimulate demand
by putting on better pricing, putting on new routes, and
basically more capacity. Other parts of the world saw a
(12:11):
lot more of that post COVID. It didn't happen so much. Here.
We're not back to the same levels of long walk
con activity as we were in twenty nineteen. But yeah,
be that as it may. The again, this will all
depend on the duration of this of this current crisis,
(12:35):
and who can know what's inside Donald Trump's here.
Speaker 2 (12:42):
Well, speaking of prices, I mean, we had a New
Zealand their results obviously abysmal. Then we had, you know,
this morning, the news of eleven hundred flights being canceled
up until May, and then also in New Zealand announced
this week it would lift the cost of its domestic
flights by ten dollars, short haul international by twenty and
(13:05):
long haul by ninety. That's in response to the surge
and jet fuel crisis. But in terms of I mean,
you can't just keep adding on more money to flights,
right there has to be an end to that.
Speaker 1 (13:19):
You know, airlines will test the market, they'll know where
the elasticity is in terms of consumers' ability to pay
for something. New Zealand was definitely feeling that, or has
been for over the last year or so domestic weakness,
so it would have been loathed to put up those feares.
And of course they get hammered on regional routes in
(13:41):
public forum for US for those high regional costs. On
international routes where they have about forty percent of the
traffic coming out of New Zealand, they can drive the
accept price with a little more comfort. Interestingly, and winners
(14:02):
and losers game at the moment. Of course, their flights
to the United States and then with partners on to
Europe would be pretty foot now because folks aren't going
through the Middle East, and so airlines that can offer
(14:24):
an alternative route to Europe doing particularly well. So we're
seeing Singapore Airlines, CAFA Pacific, the mainland Chinese carriers and
then of course the New Zealand corners going through the States.
Speaker 2 (14:38):
I saw a stat this week actually Grant and New
Zealand is apparently booked over a thousand people from Australia
and New Zealand to Europe. Of it last week and
last year they booked less than one a day, so
that really, I mean, it's not stopping people going to
Europe for their European holidays, but it's just how many routes,
so how many how many different ways are there to
(14:59):
get to Europe from New Zealand.
Speaker 1 (15:01):
You can't fly their NonStop at the moment. I had
it from a travel agent last week that you know,
maybe about eight percent of their business would go through
the Middle East, and so that's Qatar and Dubai so
to a large extent, even though Emirates are still flying,
(15:21):
a lot of people have been discouraged from taking those
flights for have rebooked, canceled and got a refund or
rebuilt for further out. So Middle East is a little
off the agenda at the moment, and there's certainly the
Ministry of Foreign Affairs and Trades advices do not travel
and you're going to have trouble getting insurance going through there.
(15:42):
So yeah, so you're asking about the other ways to
get there, well, to Singapore then on to Europe. Singplere
Airlines got pretty good network into Europe KFA Pacific through
Hong Kong and the mainland Chinese carriers will be doing
well out of it because they were of from recently comparedive
fears already, so all of a sudden they're back on
(16:07):
in the equation. And then the other main way of
getting to Europe would be through the United States, and
that's mainly with the New Zealand through San Francisco, La Houston,
New York, and then of course Quantus does in New
York as well.
Speaker 2 (16:24):
I saw that the Air New Zealand CEO was pretty
quick to point out that flights to the Pacific and
to regional destinations, so like your Hockiteca, Timado and Topoor,
they were less likely to be impacted by this. How
important is this foreign airline because you and I both
know that as soon as a flight to you know,
Auckland to Todong is disrupted, it does make headlines.
Speaker 1 (16:47):
Yeah, well that's right. Well, you know, any disruption and
a network is going to have knock on effects. In
New Zealand's under political pressure to retain its regional network
here and NEC in it you know, flies to twenty
places around the country. There's a big political imperative to
(17:08):
retain that network properly in New Zealander is that those
flights are fairly costly to operate. In a lot of cases,
the smaller planes that they operate to the very smallest
town's pretty old. They're you know, the Q three hundreds
are around about twenty years old on average and may
have to fly well into next decades. So not as
(17:31):
reliable as in New Zealand would like, and as I say,
not as efficient as a brand new plane. There's no
replacement plane for that aircraft size on the horizon either,
So the regional networks a challenge. And yeah, you mentioned
the Pacific Islands there, Well, you know, there's there's a
(17:54):
big obligation that in New Zealand fields here to keep
connected to the Pacific Islands for friends and family her visits.
As I understand, the.
Speaker 4 (18:11):
Current review of her flights for the next six weeks
may involve some Pacific Island services, but not many.
Speaker 1 (18:23):
I think they're looking at Bali as a as perhaps
one an international service that might take a bit of
a trimble or more of a consolidation.
Speaker 2 (18:32):
Yeah, I saw a few days ago the chief executive
of Air Chathams actually told aren Z that the rising
cost of oil is costing them about one hundred and
forty thousand dollars extra a month in fuel to your knowledge,
how much generally would you say the airlines account for
or budget for in their kind of modeling in terms
(18:54):
of that, Because one hundred and forty thousand dollars, you know,
I can't spare that next month. But how much generally
how much buffer do they give themselves?
Speaker 1 (19:04):
Look not much. Airlines are very thin margin businesses, high volume,
thin margin. You know, there's often a statistic that comes
out annually that across the globe, you know, airlines either
making the price of a cup of coffee on every
passenger the price of a you know, and then the
(19:24):
next year might be a bit better any airport sandwich.
So things have to go pretty right most of the
time to be profitable. And so airlines can can burn
money pretty quickly just as they can earn it just
as just as quickly. So I think a foresight bars
looked at the air U Zealand's current problem and they
(19:49):
estimate it will cost some another four to five million
dollars a day. So they're they're big used as a fuel.
It's there alongside labor, it's said experience.
Speaker 5 (20:07):
The reality is there's huge volatility in these markets and
this will put pressure on in New Zealand that ultimately,
you know, we want to make sure that you know
as a government we're doing everything we can to be
able to respond. That's why Nicola Willis has put in
place a minister or group looking at how we do
respond and to be seeing what if there are things
(20:30):
the government can do to stuften the impacts here in
New Zealand looking at what those.
Speaker 1 (20:34):
Are, including a cash injection for in New Zealand.
Speaker 2 (20:37):
Would you consider that?
Speaker 5 (20:38):
Oh, look, that's not that's not something I think the
minister's considering at this stage. I think the reality is
in New Zealand has to has to weather through, whether
weather the storm.
Speaker 2 (20:49):
Just lastly, I mean we talk about these jet fuel situations,
like you said, about every seven years. It's getting to
be a little bit more common. Now. Are there any
things over the years or ideas that they've come up
with recommendations rather saying look we need to do this now,
say for instance, increase fuel storage in New Zealand or
(21:11):
at Auckland Airport or something. Is there anything that just
comes up time and time again where you're sitting there
scratching your head like why has this not happened yet?
Speaker 1 (21:19):
What you always see during these times is renewed focus
on alternative ways to propel planes, so different types of fuel.
Two thousand and eight, when jet fuel prices really spiked,
it's huge enthusiasm for sustainable aviation fuel SAD as they
(21:40):
call it. People try to make it out all sorts
of things, nuts from jetropha trees, and there was mustard,
seeds andes, the technology works airlines wanted. But then the
fuel price drops and that real momentum for change ebbs
(22:04):
as well. Since then, again, you know, work's been going
on in the technology, feedstocks, plant matter, used oil. It's there,
but there hasn't been the financial incentive for refiners and
producers to make a lot of it. So at the moment,
(22:25):
staff is literally a drop in the bucket for airlines.
But you know, anything that can wing airlines off fossil
fuels has got to be a good thing in the
in the medium to long term. It's just a matter
of producers getting on board and making a lot of
it well.
Speaker 2 (22:45):
And New Zealand brought a whole bunch from was it
San Francisco. They got it from, Yeah.
Speaker 1 (22:49):
They've They've got it in from a range of places,
and yeah, they they're acutely where that they have to
fuel to proof flying for in the long term. And
it's good for the planet. But these airlines always think
(23:10):
about their balance sheet as well. They kind of know
that it makes financial sense. I expect to see a
resurgence of interest and well, what happens when oil stops flying?
What's the alternative? It's there, but can it be Producer.
Speaker 2 (23:30):
Scale, thanks for joining us, Grant pleasure, thanks for having me.
That's it for this episode of The Front Page. You
can read more about today's stories and extensive news coverage
at enzidhrald dot co dot nz. The Front Page is
hosted and produced by me Chelsea Daniels Caine. Dicky is
(23:51):
our studio operator, Richard Martin, our producer and editor, and
our executive producer is Jane Ye. Follow the Front Page
on the heart app or wherever you get your podcasts,
and join us next time for another look beyond the headlines.
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