The ongoing fuel price crisis is a significant concern for airlines, as the government vows to hold oil companies accountable for their actions.
Cath O’Brien, chief executive of the Board of Airline Representatives, explained on Morning Report that New Zealand is facing a price issue rather than a supply problem. This is due to the ongoing uncertainty in the Middle East, which continues to drive up fuel costs and disrupt air travel.
O’Brien emphasized that airlines remain committed to the New Zealand market, but tough decisions may be necessary if certain routes become unprofitable or if there is a decline in demand.
“This is definitely not a short-term issue,” O’Brien remarked. “We’re observing that fuel prices will likely stay elevated for some time.”
According to the latest government update on Wednesday, New Zealand’s fuel supplies have decreased by three or four days across all types but have remained stable overall.
O’Brien noted that cutting routes is a last resort for airlines, but it may be necessary as the situation persists.
“Airlines might decrease services or frequencies, or potentially withdraw from routes. However, I believe airlines will strive to maintain connections with New Zealand because that’s our core business.”
Last month, a Jetstar NZ representative reported that 12 percent of scheduled services were affected, including flights between Auckland and Christchurch, Auckland and Wellington, and some international routes between Auckland and Sydney, and Auckland and Brisbane.
Air New Zealand had announced plans to cancel approximately 1100 flights from early March to early May, although most passengers were expected to be accommodated on same-day flights.
ABC reported on Tuesday that Quantas will also cut domestic flights due to rising fuel costs and Middle East unrest, with extra fuel expenses reaching AU$800 million (NZ$966m).
O’Brien mentioned the challenges in forecasting future ticket prices, given the unpredictable nature of jet fuel costs.
“It’s reasonable to say that ticket prices have already increased, and we might see further rises,” she noted.
O’Brien also highlighted that airlines are planning their 2027 routes, considering the possibility of fuel prices doubling.
Having navigated the Covid crisis, O’Brien said the current fuel situation presents fewer issues, but remains significant.
“In New Zealand, we don’t have a jet fuel supply issue. There’s sufficient supply for the upcoming months, but the real challenge is the fuel price itself.”
‘Continuous price problem’ – Shane Jones
Associate Energy Minister Shane Jones told Morning Report that the primary concern is the cost of fuel, which presents a “continuous price problem.”
Recent fuel stock figures, accurate to midday Sunday, indicate 56.3 days of petrol, 45.4 days of diesel, and 47.0 days of jet fuel available or expected to arrive in the next three weeks, down from earlier reports.
Jones stated that oil companies have assured that New Zealand will not face a major fuel crisis in 2024, and the government will hold them accountable.
“If they don’t comply with the law, the financial penalties are severe,” he warned.
The government has invested in additional storage capacity, expected to be operational at Marsden Point by the end of May.
“Maintaining the credibility of major players, like Australian-listed Ampol, is crucial as the public places significant trust in the system,” Jones said.
While the main issue is fuel cost, the government has considered options to collaborate with import companies to increase fuel availability in New Zealand.
Jones mentioned ongoing collaboration with Australian advisers and politicians, and the Prime Minister’s regular communication with Singaporean leaders as part of the fuel response strategy.
“I genuinely believe we’ve explored every option… There’s no indication that the fuel companies are failing their obligations,” Jones asserted.
Prime Minister Chris Luxon stated on Wednesday that fuel importers report no significant issues with future orders or shipments, with assurances about orders through May and plans extending to June.
“We remain at phase 1 of the national fuel response plan. However, the ceasefire is fragile, and the Strait of Hormuz is effectively closed, keeping New Zealand’s fuel security risks high.”
