Speech to the Association of South Pacific Airlines conference
Good morning and thank you for asking me to address this conference today.
The Association of South Pacific Airlines is over 30 years old, which is a great achievement.
Organisations like yours play a valuable role in working together on common challenges, speaking for your industry and working with the government.
Today I'd like to discuss a few important issues facing your industry, and give you an update on government policies that affect you.
Air travel is especially important to the South Pacific because of our relatively small and isolated population, spread over nearly one third of the planet.
We rely on your industry to:
•connect us with the world and each other
•to bring in tourists and business people
•and for imports and exports, so that we can earn a living in the world.
Challenges facing aviation
Of course the aviation industry has faced many challenges in recent years.
As we all know, the global recession has had a big impact and it's been a tough couple of years.
Passenger numbers have taken a hit around the world as many people have chosen to delay travel or take a holiday closer to home.
Most indicators suggest that recovery from the recession will be a gradual process rather than a quick rebound.
A new challenge for us is the UK increasing its Air Passenger Duty for long-distance flyers.
This latest increase has meant the duty on economy class travel from the UK to our region has risen from £40 to £85 per passenger. By contrast the cost of the duty for travel to Europe has only risen from £10 to £12.
Prime Minister John Key has raised this issue with the British Prime Minister David Cameron, and the new government in the UK has pledged to review the policy. For the time being though, we are stuck with it.
It's hard to find an environmental justification for this move, given that the amount of duty per economy class passenger to New Zealand is around five times what it should be if it was simply aimed at offsetting the cost of carbon emissions.
We believe that travellers to distant locations like New Zealand and the South Pacific should not be unfairly penalised.
Closer to home there have been other challenges.
The tragic tsunami that hit Samoa, American Samoa and Tonga last year claiming so many lives has deeply affected the communities of the region.
However, the progress made in rebuilding after such devastation shows the resilience of these nations. It also shows the importance of airlines in reuniting family and friends and in restoring tourism.
The difficult operating environment in the South Pacific has been demonstrated by the end of Air New Zealand's weekly flight from Auckland to Los Angeles via Samoa and Tonga from early 2011.
This will have an impact on these countries' tourism, commercial services and export sector - however, the financial reality on a loss making route such as this meant tough decisions had to be made.
It's not all bad news though. The arrival of more competition on the New Zealand to Samoa route has been a real success story. With Air New Zealand and Polynesian Blue operating services on this route, increased competition has resulted in lower airfares and increased passenger numbers.
Safety issues
I'm well aware that funding safety regulation during these tough times has been difficult, however the goal remains to continually improve safety standards.
We want to see steady long-term improvement in the quality of safety regulators, airworthiness, security, flight operations and licensing.
It is in the interests of all members and our international reputation that we continue to have safety regulators in the region able to fulfil this role.
In saying this I am very conscious that many of your members are operating under adaptations of the New Zealand rules system.
Resurgence and opportunities
Those are some of the challenges, but at the same time there are also opportunities.
Here in New Zealand it is very encouraging that our visitor numbers have held up reasonably well over the last couple of years.
For the year ended September 2010 Statistics New Zealand information showed there were 2.52 million international visitor arrivals, up 3.8 percent or 91,500 on the previous year.
I'm also glad to report that the government is investing more in promoting New Zealand overseas. $30 million in new funding was announced in this year's budget, most of which will go towards overseas marketing.
Next year we are expecting around 85,000 visitors for the Rugby World Cup. This will be a huge event for New Zealand and the aviation industry.
Many of these visitors come from the Northern Hemisphere and will spend time visiting the wider South Pacific region.
Another positive I would like to briefly mention is a recent report from New Zealand Trade and Enterprise called ‘New Horizons'.
It showed that aviation contributed around $9.7 billion to New Zealand's GDP last year, representing 6.9 percent of the whole economy.
Innovation and new technology have been the key drivers behind this growth. New Zealand companies are exporting to the global market in areas as diverse as training, aircraft design, airport systems and even advanced rocket technology.
Aviation produces high-value products and services, and high-value jobs. This is exactly where the government sees New Zealand's future and we are very keen to do business with our neighbours.
Air Services Review
You might be aware that the Ministry of Transport is about to begin work on a broad review of New Zealand's international air transport policy.
We want to ensure our policy is supporting economic development and that regulatory frameworks are responsive and flexible to change.
Our international air transport policy was established in 1985 and restated in 1998. The 1998 policy set out the overall objective of air transport as being to maximise economic benefits to New Zealand, including trade and tourism, consistent with foreign policy and strategic considerations.
This has resulted in the most liberal and flexible air services arrangements possible with other countries, and a whole range of new agreements over the last 25 years.
Within the Pacific, we want to maintain a flexible and positive attitude in the negotiation and implementation of air services agreements with other nations.
Of course it's been a dramatic few decades for the aviation industry. We've seen rapid growth and expansion, but we've also had global challenges such as terrorism, pandemics, volatile fuel prices and the worst recession in generations.
We've also seen continuing expansion of global airline alliances, and a trend towards regional, rather than bilateral, air services agreements.
Given all this, we think a review of New Zealand's current policy is timely. Airlines and other interested parties will of course be invited to give their views.
Positive initiatives
Can I finish by giving you a couple of items of good news.
Earlier this year the government was pleased to be able to reduce the international aviation security charge paid by out-bound airlines, from $15 to $10 per departing international traveller.
The Aviation Security Service had built up large surpluses from this charge since it was last increased in 2007. By the end of March the surplus from the international charge was sitting at close to $35 million.
This level of surplus was unfair on airlines and the travelling public. It's not very often the government can reduce a charge of this kind so I'm pleased we've been able to do this.
The other bit of good news in recent months has been New Zealand formally signing up to the Cape Town Convention and the Aircraft Protocol.
This comes into force on the 1st November, and will reduce the cost of financing for companies purchasing and leasing aircraft.
This is great news for the airline industry and the benefits will be in the millions of dollars.
Conclusion
In closing, what the last few years have shown is that the aviation sector is strong and resilient.
Your industry is hugely important to our region, and as the world economy improves that importance will only increase.
Thank you again for the invitation today.