The state of the sector 2024

Economic strain – reduced agricultural incomes lead to less aerial service spending and Government cuts in pest programmes impact revenue.

The demand side outlook for commercial aviation in New Zealand is currently very challenging. For a start, in the primary production sector of which agricultural aviation is a part, returns have been falling which impacts farmers’ income and their willingness to spend on aerial applications. As a major customer, the Government has also cut back pest eradication programmes as it battles rising inflation and a weakening economy. In our view, this undoes the significant eradication work already completed.

Covid-19 impact – tourism’s slow recovery post-border closure affects aviation operators while training schools struggle due to fewer international students and high training costs.
The closure of the borders for Covid was extremely tough for the commercial air transport sector. While tourism is recovering now, the bounce back has not been as strong as initially projected and so the benefits have not flowed through to aviation operators. Adverse weather in the earlier part of this year also impacted aerial activity, especially in the North Island.
The border shutdown forced the closure of training schools who have since struggled to attract the same number of international students that came to the country before 2020 and immigration settings have not helped this. Just prior to the election, the previous Government added aviation and aeronautical engineers to the immigration Green List, which was welcomed, but these settings need to be stable over the long-term to meet workforce needs. Add to this the high cost of training for aviation students which is a barrier for entry to the sector.

Supply chain issues – import reliance and Covid-related disruptions delay engine servicing and part supplies.

On the supply side, given that most aircraft operated in New Zealand are imported, supply chain problems that built up during the Covid lockdowns continue to present challenges for many of our members in the engineering and supply division. There are extensive delays for servicing of engines and the supply of critical parts.

Fleet maintenance costs – a diverse aircraft fleet incurs high operational and maintenance costs.

New Zealand’s diverse fleet of aircraft means it cannot easily benefit from economies of scale because small fleets present maintenance and operational challenges. Parts are expensive, especially if ordered as one-off purchases. At the same time, deficits in training and knowledge retention, in having equipment in the right time at the right place, also present challenges. It is well known in aviation that a diverse fleet adds cost.

Decarbonisation needs – efforts to reduce emissions are underway but require Government grants and tax relief due to high costs of new technologies.

Just as it is globally, the aviation industry is cognisant of the efforts it needs to make to reduce carbon emissions from its activities. Air New Zealand and other operators are making concerted efforts to reduce their carbon footprint. But this is not something the industry can do alone – it needs Government support since the costs of adopting new technologies and moving away from fossil fuels are currently prohibitive for all but a few in the sector. Hydrogen and electric initiatives, like those introduced in the Netherlands, would be welcomed to support industry decarbonisation in a timely way.