Jetstar New Zealand looks set to quit its regional turboprop operations in New Zealand later this year. The airline made the announcement yesterday, Wednesday, September 25, 2019, calling it a “proposal.” But they’ve also set a date for their “proposed” exit; November 30, 2019. Having given passengers and the public the heads up, the odds are this proposal will segue into a definitive exit.
It is worth noting Jetstar proposes quitting its regional turboprop services only. Jetstar New Zealand domestic and international jet operations are not impacted. Jetstar New Zealand flies five Dash 8 300s around the North Island down to Nelson on the South Island.
What is set to be impacted?
The impacted flights include Auckland-New Plymouth-Auckland, Auckland-Nelson-Auckland, Auckland-Palmerston North-Auckland, Auckland-Napier-Auckland, and Wellington-Nelson-Wellington. The Dash 8 300s are registered to Eastern Australia Airlines (a subsidiary of the Qantas Group) with Australian tail numbers. They could be sent back to Australia to operate QantasLink Dash 8 flights.
Jetstar New Zealand’s regional flights are loss-making
Jetstar New Zealand said their regional flights were making a loss and there were no prospects of relief with rising operating costs and softening demand. In a statement provided to Simple Flying, Jetstar New Zealand CEO, Gareth Evans said;
“The New Zealand regional market is facing some headwinds, with softer demand and higher fuel costs and we don’t see the outlook changing anytime soon … We have given it a real go.”
Jetstar brought regional turboprop services to New Zealand in 2015 and have since carried over 1.3 million passengers. Mr Evans says the services have been continuing loss-makers. He notes that 25% of regional passengers travelled on tickets costing less than NZD$50 and 75% of passengers travelled on tickets costs less than NZD$100.
A financial drag on the Qantas Group
Jetstar New Zealand is a part of the Qantas Group. In August 2019, Qantas announced a handsome AUD$1.3 profit before tax in the 2018/19 financial year. Jetstar New Zealand had the dubious distinction of being the sole loss-making subsidiary of the Qantas Group. At the time Qantas CEO said they would be “monitoring this closely.”
The 2018/19 Qantas Annual report does not reveal individual financial data for Jetstar New Zealand. It groups all data from its various Jetstar subsidiaries together. Overall Jetstar made a before-tax profit of AUD$370 million. But post-transformation Qantas hasn’t been sentimental of ridding the business of loss-making components.
At the time, this led to speculation about the future of Jetstar New Zealand. Simple Flying suggested Jetstar New Zealand could cut down on its domestic network. It noted that Jetstar New Zealand operated in a market which was dominated by Air New Zealand. Many of the regional communities served by Jetstar were concerned about the airline exiting the market, saying it would result in a hike in airfares.
The local reaction to the exit
The New Zealand Herald’s Kate Hawkesby wrote this morning;
“An inevitable price hike on Air NZ flights is coming surely? Regional passengers should rightly be worried. The provinces never get a great run on airlines: they come, they dabble, they go. It’s become a familiar pattern.”
And while Jetstar’s Gareth Evans boosts of his airline having a better on-time record than Air New Zealand and high customer satisfaction, Ms Hawkesby provides another point of view.
“It’s (Jetstar) been losing money and its reputation hasn’t been great. It has a well-known nickname which I won’t repeat here that starts with “Sh” and ends in “Star”.
“Jetstar was often the subject of news headlines for delayed and cancelled flights, poor service, and chaotic airport practises. I don’t know that it was any worse than Air NZ necessarily, but it seemed to, unfortunately, garner a lot of bad press.”
But the fact remains that any airline quitting regional markets is a loss. Remaining airlines on the route, especially if they have a monopoly, will have carte blanche to raise fares and cut back on services on a take it or leave it basis.
As a reasonably regular passenger on short-haul Jetstar, I can attest it isn’t without its flaws. But, it’s safe, the aircraft are modern and well maintained, it gets you there (eventually) and the fares are keen.
Jetstar New Zealand is offering customers booked on regional turboprop services after November 30, 2019, a full refund.
The final word should go to Jetstar New Zealand CEO Gareth Evans;
“Our regional customers have been very loyal and we’d like to thank them, and all our regional stakeholders including airports, local councils, businesses and tourism organisations, for their support.”