25 Sep 2019

Shane Jones warns Air NZ as Jetstar scraps regional flights

From Checkpoint, 6:10 pm on 25 September 2019

Self appointed champion of the regions Shane Jones says he'll ask the government to reconsider his idea of a contestable fund to help airlines breaking into the regions - after Jetstar announced it's pulling the pin on unprofitable flights to small town New Zealand.

The airline is canning flights to Nelson, Napier, New Plymouth and Palmerston North from December 1, saying it has lost millions of dollars on regional routes due to high fuel costs and softening demand.

Regional Economic Development Minister, Shane Jones said rumours of Jetstar's regional demise reached him last week, but no-one approached him formally.

“I don't feel that there's much that the government really could have done in the event that they never formally approached me for any assistance whatsoever.

“We endeavoured to create an aviation connectivity fund last year, and the system is that we had to get the officials to generate some options, and there was no appetite within officialdom to put the putea at risk, and there wasn't an appetite amongst my colleagues.

“They felt that now was not the time to stretch the Crown balance sheet into that area. I always felt given that we bailed out Air New Zealand, we need to ensure that we've got a vibrant set of services in our regions."

He says the Ministry of Transport were "doubting Thomases".

"And there's three other ministers who are the provincial growth ministers - Grant Robertson, Phil Twyford and David Parker. And obviously, things that I'm promoting don't always get accepted. And that's the name of the game and I accept that.

“They were keen to ensure that the airports remain in a suitable state. But in terms of underwriting the costs of a competing airline, they were not happy with that prospect.

“I can't remember how many tens of millions would have gone into the contestable fund. I had in mind other airlines.

"Who knows, a future government might bring that type of thinking back because it's difficult to see when you've got such a dominant player such as Air New Zealand, and especially when it's pulling out of smaller areas such as Kaitaia, Whanganui, parts of the Tai Poutini - West Coast, and Whakatane, and I do worry as to whether or not the gaps going to be filled by tertiary players.

"So that was that was the thinking behind the concept of a contestable fund.

“In other countries, what you do is you underwrite part of the revenue until such time as they're up and running. Why do you do it, you would do it because you want to ensure connectivity and you want to create some competitive pressure.

“I think Kiwis need to ensure that Air New Zealand doesn't massively increase the cost of travel, it is already expensive and a lot of our regional areas, they did bring set some cheap fees down. They're not as widely available as you might think. So you need to ensure that this doesn't become an opportunity for gouging.

“I'm going to take the issue up with the senior Transport Minister. That's Mr. Twyford. However, I have to be straight up with your listeners. The reality is when the idea was floated earlier in our reign, It did not find a body of support.

“I think it's a legitimate issue. Whether or not the state needs to stretch that far, that's a moot point, I've got absolutely zero belief that the National Party would want to go into the space. But look, I'll raise it with the other ministers, but I'm not going to push it incessantly. If they feel that it is not an appropriate response."

Mr Jones says he's very disappointed Jetstar is shrinking the size of its footprint in New Zealand.

“I’m a pro-industry politician. And I've always known that, by and large, New Zealand, in terms of industry is a market-orientated society, I gave it a good shot to create some sort of subsidy fund that people could dip into, I was unsuccessful. So it's unlikely we will see that option on the table again before the next election.

“If you find cases of egregious anti-competitive behaviour, then there's an avenue to the regulatory agencies. But I say to every listener, I say to every Kiwi listening, and you have a whole host of Kiwis that listen to you. I say that you've got to back those politicians who are willing to hold to account the big end of town, the corporate end of town.

"In the absence of a fund that enables other players to come into this space and continue to offer competitive pressure, other than public vigilance, and if there are cases of gross and egregious behaviour, then whip them off to the Commerce Commission," Mr Jones says.

“Air New Zealand, you have great brand equity, but that brand belongs to New Zealanders. And it was the New Zealand public that bailed you out on the brink of insolvency, you have to honour your obligations not only to flash flights to Tokyo and flights to Chicago, but maintain high quality connectivity with the regions and if you start to slip on that, you're going to enjoy a copping, you're going to cop a lot of flak from my good self and possibly other players in the provinces. If it's egregious, they'll go down the regulatory route.”