New Zealand border reopens, restoring vital Australia aviation links


New Zealand's upcoming move to allow entry for Australian residents will mark the final step in reopening a cross-border market that is crucial to the major airlines in both countries.

This measure is part of the New Zealand government's accelerated timetable for restoring travel from some of its most important overseas markets. This follows previous steps that allowed New Zealanders to return from overseas without quarantine.

Australia acted more quickly to allow its citizens to travel overseas, and to open borders to foreign travellers - although some states were faster than others.

Although New Zealand may be lagging Australia and several other Asia-Pacific countries in letting tourists back in, at least there is progress now. The major questions now are how quickly airlines will ramp up capacity in the upcoming winter season - and what demand will be like after the initial rush.


Australia and New Zealand are heavily reliant on each other for tourism

New Zealand's new schedule for reopening to foreign visitors was announced on 16-Mar-2022.

Probably the most notable element is that vaccinated Australian residents will be permitted to arrive in the country from midnight on 12-Apr-2022. While there is no longer an isolation requirement, they will still have to undertake pre-departure and post-arrival tests.

The other major step announced by the government will allow visitors from visa-waiver countries to enter New Zealand from midnight on 1-May-2022. This list of countries includes the US, UK, Japan, South Korea and Singapore, among others.

However, it is the Australian market that is most important to New Zealand's tourism industry.

Australia represents New Zealand's largest inbound travel market. Travellers from Australia typically make up 40% of the country's international arrivals, according to the New Zealand government.

New Zealand's visitor arrivals by market, 2019

From the Australian perspective, New Zealand represented its second largest source of international visitors in 2019.

And it was only marginally behind Australia's top source, China. And in the probable absence of a rapid return of Chinese tourism, New Zealand takes on greater significance.

Australian visitor arrivals by market, 2019

Reopening has missed the high season, but there will be pent-up demand

The tourist industry will be thankful for the reopening of New Zealand's borders, although they have missed the peak season.

On the plus side, the reopening date will come before Australian school holidays, as well as the ski season.

But on the down side, the chart below shows that New Zealand is entering what - in normal times anyway - is its tourist low season.

The initial wave of pent-up demand will offset much of the seasonality factor. However, it is unknown how long this early surge will last. Once it abates, it could be tougher to generate demand over the winter.

New Zealand: monthly visitor arrivals, 2019-2022

Two-way travel should be more resilient than during 2021's travel bubble

The Australia-New Zealand market plunged in Mar-2020 as the COVID-19 pandemic began.

However, it enjoyed a resurgence around the middle of 2021 as the two countries formed a bilateral travel bubble. This brief recovery ended when the Delta variant of COVID-19 arrived, causing borders to close again.

There has been a slight uptick in capacity since late-Feb-2022. This was related to the government decision to allow New Zealanders to return from Australia without the need for quarantine from 28-Feb-2022 (and then without the need to self-isolate from 3-Mar-2022).

Australia-New Zealand capacity, as measured in two-way weekly seats, Jan-2020 to Mar-2022

Air New Zealand is currently dominant on Tasman routes, but the balance will adjust

With the New Zealand border about to open to Australians as well, airlines are preparing to boost their services in the trans Tasman market.

Air New Zealand currently has the most capacity between the two countries, with a 67.5% share of seats for the week of 21-Mar-22. Qantas accounts for 18.7%, and LATAM - which has recently restarted New Zealand services and exercises fifth freedom rights to Australia - has 13.8%.

Before the coronavirus pandemic Air New Zealand held a 37-38% share of seats in the Australia-New Zealand market. However, at that point Qantas and its Jetstar subsidiary were both operating between the two countries, as were Virgin Australia, Emirates and LATAM.

The Air New Zealand market share will likely go down as the Qantas Group adds more flights, and then again later when Virgin re-enters this market.

Australia-New Zealand capacity by airline operator, as measured in weekly two-way seats, Jan-2020 to Mar-2022

Airlines will increase flight numbers following New Zealand's reopening steps

Air New Zealand has indicated that demand is increasing for its Australian flights. This is particularly true for Easter, and the airline will add an extra 90 flights to Australia over the Easter 2022 holiday period.

The airline scheduled five Australian routes out of Auckland and three out of Christchurch for the period 28-Feb-2022 through 20-Mar-2022. Only two routes were daily, and in total Air New Zealand offered 33 weekly flights to Australia.

The airline is remaining circumspect about any plans to increase its schedule following the 13-Apr-2022 opening of the border to Australians.

Aside from the extra Easter period flights, Air New Zealand said it would adjust capacity to suit demand as the southern winter season begins.

The Qantas Group - including Jetstar - is currently operating just two return flights per week between Australia and New Zealand. It intends to boost this to up to 30 flights per week on five routes from 13-April-2022.

While this is a significant increase, it is still lower than the 170 return services per week the Qantas Group operated before the COVID-19 pandemic. Qantas said it will further increase its flights and routes to New Zealand in May-2022 and Jun-2022.

One airline that is holding back from the Australia-New Zealand market is Virgin Australia. The airline intends to relaunch its New Zealand services in Nov-2022 with a flight to the popular leisure destination Queenstown. However, Virgin also said it will continue to review its schedule and "provide services in line with demand."

Queenstown Airport said it expects to see a gradual return of direct flights from the east coast of Australia over the next two months. This is historically a quieter period for the Southern Lakes region where Queenstown is located, although the airport said airlines and border agencies are preparing for a busy ski season.

The importance of trans Tasman traffic to Queenstown is highlighted by the fact that before the pandemic 30% of all passengers at the airport arrived and departed on Australian flights. Currently there are no direct flights between Queenstown and Australia.

While the two-way flow is now less likely to be halted, there are still impediments

The return of two-way traffic flows to the trans Tasman market is certainly a huge development for the airlines involved.

Demand - and capacity - are likely to recover faster in this market than on longer-haul international routes outside the region. So these routes could assume an even greater importance for local airlines than they did before the COVID-19 crisis.

Passengers should have more confidence when they book tickets that the borders will stay open this time. However, even the trans Tasman routes will take some time to completely recover to pre-pandemic levels. As Qantas has pointed out, the continuing requirement for COVID-19 testing will dampen demand. The risk of passengers having to enter COVID protocols while overseas is another deterrent.

Airlines will be looking forward to a time when travel between the two countries can completely return to "normal" pre-pandemic settings.

It would be even better if governments could go a step further and finally make some progress on liberalising travel between the two countries. Such a move would give a boost to the travel industry at a time when it is really needed.

Unfortunately, the events of the past two years have probably made this prospect less likely, as border sensitivities have increased rather than decreased.

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