‘Driving is not cheap, either’: Air NZ responds to domestic fare hike criticism

Tuesday, 29 April 2025

Air New Zealand says flying is still affordable, adding that driving around the country is “not cheap either”, as it faces heat over air fare hikes.

On Monday, Stuff asked readers for their thoughts, after a recent round of travellers venting their frustrations at the high cost of domestic travel.

One man has complained to the Commerce Commission about Air NZ’s prices, while the Government says it is not ruling out underwriting the expansion of small regional airlines to help improve competition.

Our story got hundreds of comments and poll asking readers if they felt fares were too high veered strongly in the direction of ‘yes’.

So we sat down with the Air NZ’s chief financial officer, Richard Thomson, to hear the airline’s explanation of how pricing works.

Thomson said Air New Zealand has experienced more in cost inflation in the past three years than was was typically seen in a decade, with Covid, a weak New Zealand dollar and geopolitics all to blame.

“Our costs over the past three-and-a-half years have gone up by roughly 30%. Domestic airfares on average have gone up by around 24%. We’ve obviously done our very best to try to absorb the cost increases that are coming through everywhere,” he said.

“We’ve got hundreds, if not thousands of lines of cost that we need to wrap into the price.”

Lines of cost, for Air New Zealand, include fuel, labour, airport charges (which have also gone up), maintenance and engineering.

Thomson said the 24% price increase might feel like more for consumers, as interest rates and other cost of living needs have also increased.

So do fares go up on weekends and public holidays?

Thomson said the cost of tickets did not “necessarily” rise on weekends and public holidays.

He said while the airline has enough planes and staff most days of the year, the airline can’t put more planes and staff on for “a Friday night, Monday morning or a Coldplay concert”.

“What tends to happen then is you’ll get higher demand periods, like a Friday night or Monday morning, Ubers do it, hotels do it, where prices will go up.”

What about ‘dynamic pricing’ we hear everyone talking about?

Thomson said Air New Zealand does not use dynamic pricing, rather it uses a model called “revenue management”.

Revenue management is when businesses use data and analytics to plan and optimise pricing. It helps businesses predict customer behaviour so you can maximise product availability and pricing, according to Salesforce.

Thomson said almost every airline in the world uses revenue management.

“It’s why you’d pay more on Bookabach during the summer holidays rather than hiring somewhere on a Tuesday night in the middle of winter,” he said.

“It’s basic supply and demand.”

‘Driving is not cheap, either’

When asked if the airline felt it had let New Zealanders down, Thomson said he never wanted to let the country down.

“We don’t have the rail system that Europe has, or the autobahn, we’re an island nation.

“We fly into 20 different ports around the country. Flying commercial aircraft has always been an expensive business, over the last three to four years it’s become a much more expensive business.”

Thomson said the only relief he’d be able to offer travellers is he wouldn’t expect prices to go up by another 30% over the next three years.

“[Flying] is still a relatively affordable way to get around the country. With every $400 fare or $500 fare, there are thousands of examples of $129 fares or even $99 fares,” he said.

“I was speaking with someone before Christmas who wanted to get from Timaru to Napier, and they were paying, I think, $600 or $700 one-way it might have been.

“But the alternative to that is, you drive to Picton, it’ll cost you $100 in gas, if you take the ferry across, that’s another $250 or $300, then another $50 or $60 in gas to get to Napier.

“Driving is not cheap, either.”

Got any tips for a bargain?

Thomson said Air New Zealand had compassionate fares, but travellers needed to book early.

He acknowledged that wasn’t always an option, but advised people try to get tickets ahead of travelling.

He also said travelling off-peak was cheaper, for example mid-morning to late afternoon rather than 8am on a Monday.