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Hold on freight

Why the tourism situation has hit our exports

New Zealand’s closed border and a planned tourism reset could result in reduced air cargo capacity and higher freight costs for exporters as airlines redeploy aircraft to more profitable markets, experts say. Board of Airlines Representatives executive director Justin Tighe-Umbers says that during the pandemic New Zealand lost 90 per cent of passenger flights and the air cargo space they provided.

Auckland used to have 500 flights outbound a week, that is now down to 50; Christchurch has gone from 100 international flights to only four a week, Tighe-Umbers says.

‘‘This has smashed the available airfreight capacity for our exporters.’’

Air Tahiti Nui is reducing its capacity to New Zealand by a third due to continuing uncertainty around when New Zealand will re-open to international travellers.

Tighe-Umbers says Christchurch is looking like it will lose more international capacity this summer with Emirates pulling its Christchurch freighter out earlier than planned for the usual Christmas hiatus as there is demand for the aircraft elsewhere on its network.

American Airlines and United Airlines are not returning this summer and in October, Air Canada redeployed its freighter which was flying into Auckland four times a week.

Tighe-Umbers says he understands the aircraft has been shifted to a Canada-Europe route, which the airline can fill with passengers now that vaccinated travellers can enter quarantine-free.

‘‘Airlines are telling me that there is increasing demand for aircraft on routes that are performing better than higher-risk New Zealand flights.

‘‘Airlines are watching their revenues like hawks, many have massive debt positions since the pandemic, so if they can generate cashflow in countries with open borders, New Zealand will lose the aircraft.’’

He says that once an airline pulls out of New Zealand, it can take years for it to come back.

Recent research out of Lincoln University looked at what the impact of fewer flights in the future would mean for New Zealand exports, specifically fresh agriculture.

Researchers Rob Radics, Muhammad Umar, and Associate Professor Anthony Brien say Covid19 has demonstrated a previously underrecognised, yet significant, relationship between the agriculture supply chain and tourism.

‘‘Previously, there was never a need to consider that perishable agriculture exports were in some way reliant on tourism,’’ they wrote.

The researchers highlighted that most agricultural products delivered fresh to market are transported in the belly hold of passenger aircraft, and tourists cover some of the cost.

The researchers made the assumption that a tourism reset planned by the Government, aimed at improving sustainability of the tourism industry and attracting more high-value tourists, would result in fewer visitors arriving.

They say a drop in tourism numbers will push up transport costs to the point some businesses will not export at all and will be put out of business.

Their work showed that before Covid-19 hit, international passenger flights carried 80 per cent of New Zealand’s overall export airfreight in their belly-holds, and that it was worth $10.8 billion in 2019.

Only 20 per cent of New Zealand’s airfreight was carried by dedicated air cargo-only freighters.

Before Covid-19, air freight was less than

1 per cent of New Zealand’s total trade by volume, but about 16 per cent in terms of dollar value, the paper says.

Tourism Minister Stuart Nash says it is incorrect to assume the Government’s tourism reset will result in fewer visitors to New Zealand. There is wide agreement on the need for a more balanced approach to tourism and for the country to prioritise value over volume, Nash says.

‘‘But value does not refer solely to monetary value.’’

It also encompasses the need for tourism to give back to communities, he says.

‘‘This requires us all to consider the wellbeing of our environment and respect for cultural diversity, and to social considerations or workforce impacts.’’

The Government, the tourism industry, iwi and unions are working collaboratively on these issues through the Tourism Industry Transformation Plan announced in May, he says.

The plan will prioritise regenerative tourism, to lift standards and transform to a more sustainable model.

Airlines have indicated it will take some time before routes and schedules are able to fully gear up, Nash says. International tourism is highly valuable not just for its contribution to export earnings, but also for keeping supply chains moving and trade routes intact, he says.

Radics says the cheapest products being exported at $4 a kilogram are vegetables, which he guesses might be kumara. These will be the first goods to become constrained by the limited freight capacity and drop off the list of airfreight exports, he says. ‘‘We cannot export the same volume if we do not have the same number of passenger flights.’’ High-value products such as lobster will continue to be air-freighted but the margins exporters earn will be smaller.

Some exporters, such as fruit producers, will be able to switch to sea freight, but they will not be able to get the same value for their product, he says.

A high-value visitor could be someone who visits outside of peak season, goes to different parts of the country or fills an employment gap. Chris Roberts Chief executive, Tourism Industry Aotearoa

‘‘It could result it lower total export value.’’ Tourism Industry Aotearoa chief executive Chris Roberts says the research highlights something the industry group has been aware of for some time, that tourism is an economic enabler for other industries.

The tourism boom leading up to Covid-19 resulted in more airlines flying here, providing exports with a range of options to get their goods to market, he says.

‘‘That was the unseen bonus of the visitor boom,’’ Roberts says. ‘‘It was really benefiting our other industries.’’

He says no one has put a number on whether the tourism reset will result in fewer people coming.

‘‘There hasn’t really been much detail yet on what this new vision of tourism might look like.’’

At this point it will be largely market forces, such as the actions of the airlines and travel businesses, that determine what type of tourists visit in the future and in what volumes, he says.

Demand to travel to New Zealand is as high as it has ever been and there will be a degree of pent-up demand caused by the pandemic, he says.

‘‘The problem will be getting here. We have far fewer planes flying in and out of New Zealand.’’

Most of those that are still flying here are being heavily subsidised by the Government’s freight subsidy scheme.

As the rest of the world opens up, those aircraft will be moved elsewhere.

‘‘It’s going to be a massive job attracting airlines back to New Zealand. Unless New Zealand is seen as a profitable route, they won’t fly here.’’

New Zealand is incredibly lucky to have Air New Zealand as a national carrier because it will always provide international connections to New Zealand, Roberts says.

But no other airline has loyalty to New Zealand or any reason to continue flying here if they can’t do it profitably, he says.

When New Zealand’s borders do open to international travel, the freight subsidy will end with passengers once again subsidising freight.

Visitor numbers will eventually return to preCovid levels and perhaps surpass them.

But it won’t happen quickly. Roberts says 2022 is going to be a very slow reopening of borders ‘‘and probably more likely to feature a trickle of returning international visitors rather than a flood. It could take four to five years before we have totally unrestricted travel.’’

He says every Government since 1950 has been saying it wants to attract high-value visitors.

New Zealand has actually been successful in achieving that, boasting one of the highest average spends per visitor in the world, pre-Covid, he says.

‘‘But we can always look to get more money from visitors.’’

That can be achieved by offering even better experiences.

It’s easy to view high-value visitors as wealthy individuals with lots of money to spend, but there are other ways to define a high-value visitor.

For example, a visitor who comes outside the peak season and is not putting pressure on infrastructure is more valuable than someone coming at peak season, he says.

Someone who visits different regions is a valuable visitor, as is someone who comes on a working holiday visa and fills jobs New Zealanders aren’t prepared to do.

‘‘There are so many ways of defining what a high-value visitor actually is.

‘‘That’s one of the areas where we could do some more work and try to get a wider agreement on what exactly it is we mean when we say high-value visitor.’’

Roberts says ensuring sustainability in the industry is about managing congestion at sites already identified as being subjected to overtourism, such as Milford Sound and Tongariro Crossing. ‘‘The number of visitors is not the issue, it’s whether the infrastructure is available to look after them.’’

Catherine Beard, executive director at ExportNZ, says a reduction in air-freight capacity has added to the headache exporters face around wider supply chain disruption.

New Zealand had fantastic air-freight connectivity and pricing pre-Covid, she says. ‘‘It’s the passengers on planes that essentially make air cargo really affordable. If you don’t get that back, then air cargo will look expensive.’’

Pre-Covid it was easy to put things on an aircraft without too much pre-planning or worry about cost.

‘‘Arguably we were putting things on planes that we probably didn’t need to. Of course that’s all changed now.’’ Beard says that pre-Covid, heavy goods such as towbars were being air-freighted because it was so affordable and fast. ‘‘Those days are kind of behind us.’’

Even with the Government’s air freight subsidy scheme, rates are still far higher than they were pre-Covid, she says.

‘‘Some of our exporters have been soldiering on, and the margins have probably not been there.’’ Exporters and businesses across the board are raising prices to factor in additional costs, she says.

‘‘They have been more able to put their prices up because this is a global problem.

‘‘If this was a New Zealand problem you couldn’t do that because you’re not competitive.’’

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2021-12-05T08:00:00.0000000Z

2021-12-05T08:00:00.0000000Z

https://fairfaxmedia.pressreader.com/article/282677575576835

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