Jeremy O'Brien: Air New Zealand's Chief customer and digital officer blames accelerated inflation for increase in prices

It's thought that the aviation sector is over capitalising - as New Zealand's domestic airfares have shot up more quickly than any other country.  

A global airport group says domestic airfares are up 63% in six years, and are well ahead of the second-highest, up 53%.

Air New Zealand's Chief customer and digital officer Jeremy O'Brien told Mike Hosking that accelerated inflation is effecting the industry. 

He says we're a reasonably small country with long distances to fly.

O'Brien says in many cases the industry is over-capitalising, which then impacts the sustainability of the market.

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Episode Transcript

Speaker 1 (00:00):
You think you're paying a lot for airfares, you are right.
New report out this morning. This is from the Airport
Council International, the ACI, And then that's a bit of
a story. I suspect sixty three percent increase in this
country domestically since twenty nineteen an airline tickets one of
the highest in the world, Malaysia's fifty three, Vietnams fifty two.
It's inflationary pressures, they claim, not airport charges. Now. Jeremy

(00:21):
O'Brien's the New Zealand Chief Customer and Digital officer, and
as well, there's Jeremy good morning, Good morning, Mike Kane.
Very well. Indeed, So how many facts are we dealing
with here versus how much politics is at play?

Speaker 2 (00:32):
Yeah, Look, so I can only really speak to the
data that we've got, and you know, air data shows
that's that over that period as at thirty five percent,
and we understand is that that's a big increase. But
you know the reason for that is that costs are
up by out of forty percent, and so we haven't
passed that cost on to the consumer. But is it
a high high cost market that is exagerating at the moment?

Speaker 1 (00:56):
Do you get where they get their sixty three from.

Speaker 2 (01:00):
Now I don't really get where they give you sixty
three from. I look at air data and air sacs
that you know we report regularly, and so you know,
we're very confident in their backs base, and that fact
base tells us that fears are up thirty five percent
in our costs are up over forty per cent.

Speaker 1 (01:15):
Now the marginal role of airport charges would you call
them marginal?

Speaker 2 (01:21):
Well, look if I give you an example before, you know,
if you take it one way flight from Aubland to Wellington,
we now pay sixty dollars sixty two fees before that
aircraft that even miss the ground. So you know that's
a pretty fit pro portion of your costs. And if
I look at landing charges and packs levies over automatically,
they're up forty three to cents in twenty nineteen, and
then ify tweety SAX we expect they're going to be

(01:43):
up to sixty seventy six a cent. So I wouldn't
say that that's a small amount.

Speaker 1 (01:47):
In the report they talk of the so called single
till deals places like India and China where airports are
regulating controlled by the government stuff. Is there anything in that?
I mean, are we just a completely different model and
it's pointless looking at it.

Speaker 2 (01:59):
Look, I think it is a different model, and you
know that is the model we're operating within within the market.
So you know, we have to run with the model
that accepted in this market and that's what we try
to manage.

Speaker 1 (02:10):
So where are we at with the airports? I mean
the ComCom I personally was surprised the other day when
they decided they didn't need to look at airports. I mean,
I would have thought the airports need looking at. What's
your view?

Speaker 2 (02:20):
Look? I mean, as you is, we look at we
need to look at the whole aviation sector. The reality
is we've seen significant cost inflation in our semestic environments
that we're operating within. There's quite a lot of capital
going to airports around the country and the reality is
we are a reasonably small country with long distances supply

(02:42):
and air position would be that in many cases we
think we're over capitalizing and that it's going to impact
the long term sustainability and affordability of the market here
in New Zealand.

Speaker 1 (02:51):
It doesn't change anything for the punter, though, is I
mean the price is the price, and we hate the price,
don't we.

Speaker 2 (02:56):
Yeah, looking you know, I don't like the fact that
we're having to pay for exten more costs either, but
it is the reality of what we're facing from that
cost environment perspective, and I think you know all of that.
From a New Zealand perspective, I would like it to
not be as high inflation as it is, but the
aviation spectre at the moment here domestically is facing significant

(03:17):
exhilaration in cost.

Speaker 1 (03:19):
Good one. Jeremy appreciate it. Jeremy I Brian in New Zealand,
Chief Customer and Digital Officer. Never the twins shall meet,
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