The Press SATURDAY, AUGUST 16, 1969. More Competition For Air N.Z.

Press, Volume CIX, Issue 32068, 16 August 1969, Page 12

The Press SATURDAY, AUGUST 16, 1969. More Competition For Air N.Z.

Since the decision of the United States Civil Aeronautics Board this year to allow American Airlines to compete with Pan American World Airways on South Pacific routes, Air New Zealand has known that shortly it will face increased competition on its Auckland-Los Angeles route. The route must be one of the New Zealand line’s least profitable— lf not its most unprofitable: load factors are frequently less than 40 per cent, although Air New Zealand has been flying to Los Angeles for nearly four years. In that period New Zealand has gone through a recession, the United States balance-of-payments difficulties have restricted the growth of American tourist traffic, and the frequency of competing flights has increased. The president of American Airlines (Mr G. A. Spa ter) has a truly American confidence in the effect of extra competition in stimulating an increase in over-all demand. American Airlines would generate “ 85 per cent more traffic over and above the present “ annual growth in three to five years ”, he said, on his arrival in Auckland. Apart from its ambiguity, this forecast needs to be spelled out with the assumptions on which it is based before it can be taken seriously. How frequent a service is contemplated? What fares are to be charged? Mr Spater would not answer the first question, and apparently was not asked the second question. American Airlines, according to the talk in aviation circles, is unlikely to be offered more than two flights a week initially—one of them terminating at Christchurch. Mr Spater was evidently hoping for more than this, as he said it would be economically desirable to run flights “ seven days a week to some- “ where west of Honolulu ”. American Airlines’ fares are determined, as those of other operators are, by the International Air Transport Association—except on the rare occasions when an operator can persuade the governments concerned to overrule a decision of I.A.T.A. Pan American, which has asked the United States and Japanese Governments to approve a 23 per cent reduction in fares for its New York-Japan polar route, also wants to reduce fares on South Pacific routes. Qantas and Air New Zealand will probably oppose the Pan American proposals at the next I-A.T.A. meeting; but it is by no means certain that all three Governments would oppose them. The New Zealand Government was recommended by the National Party conference to consider the welfare of the whole New Zealand tourist industry, and not merely the interests of Air New Zealand, when decisions on fare structures are made. Here it is dearly in the interests of the New Zealand tourist industry to allow American Airlines a reasonable frequency of service and to encourage all air lines to reduce fares on routes to New Zealand. It is by no means certain, however, that a reduction of, say, 20 per cent in the Los Angeles-Auckland fare would be harmful to Air New Zealand. If the reduction led to a 25 per cent increase in the number of passengers carried, Air New Zealand’s gross revenue would be unchanged. Some further small increase would be needed to cover the marginal cost of carrying the extra passengers. From the standpoint of the New Zealand tourist industry, the surplus capadty of Air New Zealand and of New Zealand hotels is scarce capital lying idle. The Government should not be unduly influenced either by Mr Spater’s brashness or by Air New Zealand’s apprehension; it should give American Airlines a reasonable chance to prove its claims, and should encourage Air New Zealand to take a chance on filling its vacant seats at lower fares.