Benje Patterson has decided to have a look at domestic air travel – with reference to the entry of Jetstar in June 2009 (Infometrics link here). Their entry, and the associated increase in competition in regional air routes, can be expected to have spillover benefits to the regional economies that are exposed to this:
According to data from Statistics New Zealand, the price of domestic air travel has risen by a mere 3.3 % over the past four years. Over the same period general prices climbed by 8.8%, implying that the price of domestic air travel fell relative to most other expenses. This relative improvement to the affordability of domestic air travel has massively expanded the size of the domestic market by bringing flying within the budgets of a wider cross-section of society.
Air connectivity between geographically dispersed parts of New Zealand provides an economic enabling effect for entrepreneurial activity. In remote parts of the country, that do not have a location advantage, the availability of air travel helps create more efficient access to markets, people, ideas, and capital.
Even as the world becomes more digitally connected, there is still, at times, no substitute for face-to-face meetings, particularly in multilateral discussions between various parties. Efficient air connections can improve worker productivity by reducing downtime between meetings and freeing up more time to focus on other important tasks.
A similar pattern undeniably exists in domestic tourism. Furthermore, the increase in competition has not just been on regional routes – the cost of travel to Australia has also seen a significant downward shift in recent years, as touched on previously. Although there have been sizable changes in the utilization of these new, more competitive, airline services it will still be some time until the full impact is felt within the New Zealand economy.