Commerce Commission should investigate regional air routes - economist

The Commerce Commission should be keeping a close eye on Air New Zealand with its main rival pulling out of domestic routes, according to a prominent economist.

Jetstar this week said it will axe its regional services at the end of November, citing increasing costs and falling demand.

"We have given it a real go," said CEO Gareth Evans. "However, despite four years of hard work - including becoming the most on-time of the two major regional airlines and having high customer satisfaction - our regional network continues to be loss-making."

Economist Shamubeel Eaqub told The AM Show on Thursday Jetstar forced Air NZ to drop its prices.

"I go to Palmerston North every month, and I noticed the difference in prices when Jetstar joined. I'm going to be disappointed when Jetstar leaves, because it means prices are going to go up. As consumers, we're going to pay."

He's calling on the competition watchdog to get involved.

"The Commerce Commission really needs to take ownership of this... at the moment it's with the Minister of Transport. I think the responsibility should be with the Commerce Commission because it's a competition issue. 

"We need to make sure we have a very competitive and well-run regional airline network because it's vital for [the economy]."

Air NZ has said it'll keep its fares where they are until at least the end of 2020. 

Regional Economic Development Minister Shane Jones told TVNZ on Thursday morning the airline, majority-owned by the Government since a bailout in 2001, has "an obligation to look after Kiwis".

"There's a lot of brand equity in their name, there's a lot of goodwill - do not use this as an opportunity to gauge the day-to-day travellers, the business travellers."

Shamubeel Eaqub.
Shamubeel Eaqub. Photo credit: The AM Show

National Party MP Paula Bennett, appearing alongside Jones, blamed the "tanking" economy.

"People can't afford the kind of travel and it's the effect it has on somewhere like Jetstar, so it really is a shame, not just for those in the regions [sic]."

And not just the regions. Eaqub says it'll be a blow to people travelling from Auckland to the capital if Air NZ takes advantage and ups its prices. 

"If you don't take a plane it's bloody expensive, and takes what, 12 hours [via] train? That's not really going to work."