Jon Duffy: Consumer NZ CEO urges the Government to investigate aviation sector competition

A probe of aviation competition could bring New Zealanders better prices. 

Consumer NZ has asked the Government to direct the Commerce Commission to investigate aviation in its next market study. 

It says Air New Zealand has a virtual monopoly on many domestic routes - and it's affecting regional airfares. 

Consumer CEO Jon Duffy says a probe would reveal why prices are so high, and how to change things.

"It allows for a reasoned and evidence-based debate on what the next best options are, and then you can hand it back to the Government and say - alright, you know what you could do to fix things. It's up to you whether you do it or not."

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Episode Transcript

Speaker 1 (00:00):
Hever du for Clan nine.

Speaker 2 (00:02):
Nineteen is the text understandard text fees apply now to
another subject, consumer, New Zealand. Once the government's inquiry into
a New Zealand's prices, they say, e New Zealand has
a virtual monopoly domestically, so they want the Commerce Commission
to do a market study and consumer in z CEO's
John Duffy, Hey, John.

Speaker 1 (00:19):
Hey, here the how's the guard?

Speaker 2 (00:20):
Good? Thank you?

Speaker 1 (00:21):
Now, what do you reckon?

Speaker 2 (00:22):
A market study is going to find?

Speaker 1 (00:24):
Well, it would bring some transparency into pricing in the
New Zealand aviation market. So at the moment we've got
a whole lot of confusion, a whole lot of really
high prices and a whole lot of annoyed consumers and
we need to get to the bottom of what's driving
prices in this market.

Speaker 2 (00:40):
Yeah, now, transparency is cool, but that doesn't sound like
it's actually going to fix anything, will change anything for
me or you?

Speaker 1 (00:46):
Is it? Yeah, it's the start, it's the start of change.
So it's very easy to point your finger at you know,
one or two potential causes for high prices, But until
you've done a comprehensive study and you can say this
is what the market dynamics look like. It's it's very
difficult to say these are the things that we can
do to fix the problems in the market. And you

(01:09):
know in previous market studies, you know that that has
been that, you know, the problem that people have raised
the market studies happened let's say supermarkets or banks or fuel,
and the market doesn't change immediately. The commis christionis final
report Lands, but it allows for a reason to evidence
based debate on what the next best options are and
then you can hand it back to the government and say,

(01:30):
all right, you know what you could do to fix things.
It's up to you whether you do it or not.

Speaker 2 (01:35):
So what do we do if we find out that
they're making too much money off us?

Speaker 1 (01:40):
That's that's a good question. We look at perhaps what
the barriers too, this is in the market are facing
so that they can expand their operation and use natural
competitive tension to lower prices and increase service. So when
we say we need an inquiry into the aviation market,
we're not just saying this is a this is a
look at a New Zealand. In New Zealand are a

(02:01):
very dominant force in the domestic aviation market. We're saying
we need to have a look at the whole shooting match.
So the role airports play, the role, small airlines play
the role are border transport infrastructure plays because you know,
if you could, if you can get in the car
reasonably as an alternative for flying, that's actually competition. If
you my coach, those are that influence your decision whether

(02:26):
or not to buy an airline price and influence how
those airlines set their prices to compete with other modes
of transportation.

Speaker 2 (02:33):
So how many routes are there where air New Zealand
has got no other competition in the air.

Speaker 1 (02:40):
Look, don't have that in front of me, but it
as more than half of the roots of New Zealand.
There are New Zealand in New Zealand has a virtual
monopoly or there is or there is only offering limited
seat in competition.

Speaker 2 (02:56):
So would you count, for example, like Wellington depict In
as a virtual monopoly because there's just a very small
player up against in New Zealand.

Speaker 1 (03:04):
I'm not even sure if in New Zealand flies and
depict In, but I know sounds maybe not that route.

Speaker 2 (03:09):
But let's say Lenham, Let's say Wellington Blenham.

Speaker 1 (03:11):
Yep, Wellington Blenham or Wellington Nelson there is there's there's
one other player, as I understand it, with limited capacity
flying those routes.

Speaker 2 (03:20):
Virtual monopoly then.

Speaker 1 (03:22):
Certainly high market share. But then if you look at
I don't know Wellington Gismond for example, I don't think
there's anyone else. If in New Zealand is not flying
that day, that's a problem if you live in Gisbond
and need to get home.

Speaker 2 (03:36):
John, how much money would be too much money that
they'd be making off us?

Speaker 1 (03:41):
Well, well, that's a big question is so we we
discovered that a million dollars a day in excess profits
was too much for for supermarkets to be making. You know,
the New Zealand public was very very uncomfortable with that.
The complicating factor here is that, you know, there's a
bit of a merry go round of money here because
the government as a majority shareholder in New Zealand. So

(04:03):
if in New Zealand are making profits above what they
should be in a normally competitive market, some of those
profits are going back to the government as the majority shareholder.
Whether those are whether that's appropriate or not, that's another question,
and probably more of a political question than the one
a competition in quiry would answer.

Speaker 2 (04:21):
John, thanks very much, John Duffy, consuming New Zealand CEO.
Hey to the States really quickly the econ.

Speaker 1 (04:27):
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Speaker 2 (04:29):
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