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Report says Trans Tasman Code Share would cost Wellington $34m
A report, commissioned by Wellington International Airport to assess the costs and benefits of the proposed code-share as part of its submission to the Transport Ministry and undertaken by economic and financial analysis firm LECG, has found that a trans-Tasman cod share between Air New Zealand and Qantas could cost Wellington $NZ34 million a year in lost spending by international visitors.
It also found that fares on trans Tasman flights from Wellington could rise by 19% leading to a fall in visitor numbers.
The NZ Government is considering an application by Qantas and Air New Zealand to combine their trans-Tasman services in a code-share arrangement to stop their current multi million dollar losses on the route.
The report says the code-share would alter Air New Zealand and Qantas operations on the Tasman route from Wellington, allowing the airlines, which already dominate the Tasman route, to act as a cartel, raise prices and jointly impede entry by competitors.
Based on the economic assumptions used by the Commerce Commission when it rejected an alliance application by the airlines in 2002, the Report says that on services to Sydney and Melbourne, on which Air New Zealand and Qantas would have a monopoly, prices could rise by 19%.
The Report also adds that even assuming an average fare increase of 16% on those routes, economic modelling suggests a 21% drop in passenger numbers in and out of Wellington, with a very significant impact on the Wellington region, estimated to be as high $NZ34 million a year.
The Report also proposes that as a result of the airlines’ ability to raise trans-Tasman fares to and from Wellington without the potential of passengers switching to services from Auckland or Christchurch means Wellington should be regarded as a separate market.
The Report rejects the airlines’ claim that there was a massive over-capacity on the trans-Tasman route, suggesting that the average combined load factor of all airlines, 70% showed an efficient market and that any reduction would harm the public interest.
Under the proposed code share proposal, Wellington would lose 7 flights a week to 45, with Air New Zealand flying 10 of those with the remainder operated by Qantas.
Pacific Blue flies three times a week to Brisbane from Wellington.
Report by The Mole
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