Expect overseas travel to cost more

Prepare to stump up more for your overseas holiday after border reopens as existing costs rise and new costs emerge. John Anthony reports.

Overseas travel is expected to become more expensive when the New Zealand border reopens because of increases in existing costs and the arrival of new ones, experts say.

With the Government’s border reopening plan delayed until the end of February, there is still a big question mark around when border restrictions will be relaxed.

In November, the Government announced a phased reopening that would have allowed vaccinated arrivals to skip MIQ and self-isolate for a week on their return to New Zealand. But the emergence of the Omicron variant meant the Government changed those plans just before Christmas.

At the time Covid-19 Response Minister Chris Hipkins said the Government aimed to allow vaccinated New Zealanders from all countries to skip MIQ from late February.

Then on Wednesday, Hipkins said there was “no question” the Government was moving to a self-isolation model, but could not provide a timeframe, saying officials had to consider how Omicron could change border arrangements.

Board of Airline Representative executive director Justin Tighe-Umbers says the Government needs to let airlines know when borders will open no later than mid-February because this is when they lock in their schedules for next summer.

“Any later than that and many airlines will put their planes on overseas routes where they can be filled,” Tighe-Umbers says.

The days of excess capacity and price wars for international flights from New Zealand are gone for now, he says.

The return of cheap international airfares hinges on airlines being able to fill their aircraft.

“Until our border settings catch up with the rest of the world and allow quarantine-free entry for vaccinated travellers, business and leisure passenger volumes will remain low, and airfares will remain higher than normal.”

He says there are a lot of headwinds for airlines at the moment, and the overall cost of operating flights is going up, driven by the price of jet fuel increasing by more than 80 per cent over the past year alone.

In New Zealand, border charges are priced into airfares, and with fewer than 10 per cent of normal international passengers, charges per passenger are rising significantly, he says.

Visitors to New Zealand also have to pay an international visitor levy of $35 per passenger.

Tighe-Umbers says airlines are concerned the Government is considering raising the levy, “which couldn’t come at a worse time”.

Travellers also face new costs such as pre-departure tests and Covid-19 insurance premiums, he says.

Independent economist Benje Patterson says when international travel to and from

New Zealand resumes there may initially be some steep discounting from airlines to encourage people to fly again.

The biggest discounting is likely to be on routes where capacity can ramp up quickly, he says, particularly on the Tasman where narrow body jets from domestic services can be easily deployed to cross the

ditch.

But after an initial period of discounting, prices are likely to start creeping higher than pre-pandemic levels.

These price increases will be particularly noticeable on long-haul flights, and will be primarily driven by fewer airlines servicing the New Zealand market.

“The reality is that New Zealand’s extended period of closed borders has left some international airlines looking elsewhere in the globe, and it will take some time before they are confident enough to re-establish themselves in our market.”

During the pandemic New Zealand lost 90 per cent of passenger flights. Auckland used to have 500 flights outbound a week, that is now down to about 50.