Airfare pain: Massive rise in international prices as millions more travel on Air NZ

Due to the high demand for air travel and a shortage of capacity, international air fares rose by 19 percent in the last quarter of last year.

Westpac says domestic rates are also up 14 percent
in the three months, according to the latest Consumer Price Index (CPI).

This came on top of comparable airfare increases for the previous quarter.

And millions more people pay higher rates.

Today’s Stats NZ figures were released as Air New Zealand said it carried 50 per cent more passengers last year than in 2021 – an increase from eight million to 12.3 million.

Westpac senior economist Satish Ranchhod said the increases were “extraordinary” and contributed to the CPI increase of 1.4 percent for the quarter and an annual increase of 7.2 percent.

Inflation has also been boosted by the post-Covid recovery in both domestic and international tourism. That contributed to further sharp increases in transport costs.”

He said the impact of rising mortgage rates, especially for those coming from low fixed rates, would impact demand for travel, traditionally highly discretionary spending, in 2023.

The increase in hotel rates is reflected in what the ASB described as ”significant” increases in accommodation services inflation, from 4.7 percent for the quarter and 14 percent for the year.

Air NZ, the main airline operating international and domestic routes, attributed its fare increases to higher operating costs last year.

It blamed fuel for the increased cost, but prices had now fallen from the peaks seen early last year after the Russian invasion of Ukraine.

The airline has said prices are being driven by strong demand at a time when capacity has not been restored to pre-Covid levels.

In the aviation sector, the domestic network is running at almost 90 percent of its pre-Covid level and internationally at about 70 percent.

With the reopening of China, more capacity is steadily being restored.

Carriers in mainland China, China Southern and China Eastern, are building capacity to daily. Before the pandemic, discounted flights through China were among the cheapest flights to Europe.

Figures from Air NZ show that 9.4 million customers traveled on the domestic network last year, up from 7.4 million passengers in 2021.

With the reopening of the international border, 2.9 million customers traveled on the carrier, compared to 500,000 in 2021.

Chief Customer and Sales Officer Leanne Geraghty said 2022 was an incredibly busy year with the border reopening.

The airline restarted 24 international services and hired 2,200 staff to boost headcount to 10,500 – 2,000 fewer than pre-pandemic peak.