Qantas reports record profit as New Zealand domestic flights take off

Cheaper fares and a wider range of options are prompting more Kiwis to fly around New Zealand.

Qantas has revealed that more than a million New Zealand passengers travelled on Jetstar's domestic flights in the first six months of this year.

It launched a range of new regional routes at the end of 2015, between New Plymouth, Nelson, Napier, Palmerston North, Auckland and Wellington.

Analyst Benje Patterson, from Infometrics, said domestic passenger numbers on the Jetstar New Zealand network rose 39 per cent for the six months since Jetstar launched its domestic flights, compared to the same period the previous year.

READ MORE: * Jetstar's regional routes will hit Air New Zealand's revenue

Air New Zealand recorded 2.3 per cent growth over the same period.

"There were almost 1.2 million people who flew domestically with Jetstar over the first six months of 2016 – the first time that Jetstar New Zealand has carried more than one million domestic passengers over a six-month period," he said.

Patterson said the arrival of a new domestic player had boosted the number of Kiwis flying.

"Rather than simply cannibalising market share from Air New Zealand, the infusion of additional competition from Jetstar has expanded the domestic market by bringing flying within the budgets of a wider range of businesses and households.  Over the six months to June, total passenger numbers across both airlines were up 7.9 per cent on a year earlier," he said.

Price was a big factor, he said. "Domestic travellers are quite price sensitive."

Statistics New Zealand data shows the price of domestic air travel fell 14 per cent between December 2015 and June 2016.

Commentator Irene King said the growth in the New Zealand economy, and New Zealanders' desire to "back the underdog" were also helping Jetstar. "People will try Jetstar, particularly if it's a great price and there is a flight at the time they want to travel."

She said she would expect to continue to see passenger numbers growing.

While Jetstar is gaining traction with its new routes and increased capacity, it is not yet winning the domestic war.

Air New Zealand still has the lion's share of the New Zealand domestic market – it carried almost five million domestic passengers in the year to December 2015.

Patterson said Jetstar has just under 20 per cent of domestic passengers in the six months to June, up from 16.1 per cent in the six months to December.

King agreed Air New Zealand would not be worried.  She said it would also benefit from more people entering the domestic air travel market.

"When you get in place robust competition, both carriers rise to the top. The real beneficiary is the New Zealand consumer."

She said research had shown that in situations such as this, even if one carrier were to leave the market, passenger numbers would stay roughly the same.

"It's attracted people to fly who would previously have used the family car or not gone. It's opening up a whole new market travellers for the industry."

The airline's owner, Qantas, has reported a record profit, driven in part by its expansion of Jetstar flights throughout regional New Zealand. It pulled in A$1.53 billion ($1.6b) in the year to June 30, up 57 per cent on the year before.

It said its Jetstar Group had earnings of A$452 million, almost double what it achieved in the previous financial year.

Qantas said Jetstar had also done well in Asia over the year, with an A$85 million improvement in profitability, year-on-year.

The profit was the airline's best in its 95 years of operation.

It is to reward 25,000 staff with a one-off A$3000 bonus, and will return A$500 million to shareholders.

 - Stuff


Last updated 13:40, August 24 2016