Air NZ creates market opportunity

There has been rather little wailing and gnashing of teeth from some quarters about predominantly state-owned Air New Zealand making an entirely commercial decision to restructure its regional domestic operations.

There has been some focus on it dropping flights altogether to Kaitaia, Whakatane and Westport, but it is also dropping some other services like from Wellington to Taupo (Rotorua isn't that far).  On the other hand it is significantly increasing capacity on other routes as it flies larger ATR72 aircraft into centres like Napier and New Plymouth, then enabling its 50 seat Q300s to fly into smaller airports like Wanganui, Blenheim, Timaru and Hokitika.  More seats mean cheaper fares.  For most of the regional locations this is good news.

The current services are losing money because people aren't prepared to pay the fares necessary to keep services going, at NZ$1 million a month, or NZ$26 per trip.  People aren't prepared to pay that much more, and there is a longer term issue is that the planes that Air New Zealand uses, Beechcraft 1900D (through its subsidiary Eagle Airways) need replacement.  Air New Zealand, to its credit, has been using them intensively, but there simply isn't a 19 seater turboprop airliner available that could replace them economically.

So airports that can handle the much bigger 50 seat Bombardier Q-300, get them, and the airline gets some more of the ATR72s to service larger centres.

What of the airports that are losing services?  It's a market opportunity.  One of the few acts of liberalisation of the Muldoon Government (which curiously, the then Labour Opposition opposed, with one Richard Prebble leading the debate opposing it), was to deregulate domestic air services, removing Air New Zealand's statutory monopoly on domestic services (although it took a lifting of the foreign ownership limit from 15% to 50% and later abolished altogether to see Ansett NZ challenge Air NZ on the main trunk route).   For decades it was thought "normal" for the state to guarantee air services by its own airline providing them, and woe betide any upstart with lower costs competing with the heavily unionised state carrier.  

Not any more.

Already Sunair and SoundAir have been talking about new services as a result, which is exactly how it should be.  Opportunities to shift a dozen or so people by air between small airports give rise to innovation and entrepreneurship.  With a relatively highly valued NZ$ it is also easier to bring in high capital goods like airliners.  We shall see what happens (and of course, it does beg the question as to why the state continues to own the rest of Air NZ).

Contrast that to how Auckland urban transport is treated by politicians and planners.  One of the main tasks in recent years has been to seek to snuff out entrepreneurship and innovation by bus operators running commercially viable services, preferring to dish out ratepayer and fuel/RUC taxpayer subsidies to routes the planners deem best (without even mentioning the billion dollar railway that loses money).

Odd then, if the free market is seen fit to deal with how regional towns and cities get air services (noting in quite a few countries, including Australia and the US, rent-seeking rural lobbies have gained subsidies for uneconomic air services to be operated by state approved monopolies), why not for how people get around cities?  Is it because it wouldn't deliver the planners' answer of passenger rail in lower density cities with dispersed commuter patterns, but rather a more dynamic network of buses and for roads to cost a bit more in the peak, but a lot less off peak?

Forgotten Post from the Past: Gordon Brown, temper tantrum

The one thing that can't be said of current UK Labour Leader Ed Miliband, is that he loses his temper, he is positively serene compared to his predecessor, if not any more competent.  Gordon Brown is much closer to NZ erstwhile Labour loser David Cunliffe... it's worth recalling this story from four years ago....

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Major allegations in the weekend that Gordon Brown is a bully deserve more careful consideration than the obvious kneejerk. There was never any allegation of violence, but reports in both the Observer and the Evening Standard allege Gordon Brown:
- is always look for someone to blame;
- is constantly on the verge of an explosion;
- does not get as much information as he could or should get because he erupts with bad news and blames the messenger;
- repeatedly throws mobile phones in anger;
- repeatedly threw computer keyboards (and staplers) onto the floor in anger.

Bullying? Well those who allege such a thing ought to stand up. However, the bigger story is his anger in dealing with staff, and difficulty in accepting blame. Not for one moment will Brown accept he overspent whilst he was Chancellor of the Exchequer, even though he almost always ran significant budget deficits - during the good years. Not for one moment will Brown accept some responsibility for an investment environment that encouraged property speculation and rewarded the banking industry for investing the vast quantities of fiat money that buoyed the economy, until it crashed. Nor will he accept that the vast spending increases on the NHS have delivered much other than increase salaries and tread water.

In short, he doesn't like taking advice which tells him he is wrong, and so because he does not receive bad news as quickly as he should, and because criticism and self-reflection have to be driven internally, and not from advice, he is more prone to making mistakes.

Now there is never a shortage of reasons to vote against incumbent politicians. Most are gutless against the claims and calls of the vested interests who want other people's money, want to restrict the private property rights of others and prevent competition. Lying, deliberate obfuscation and a belief they know best for others are all par for the course.

However, to be unable to listen to advice, to be only too willing to blame those around him, when he himself makes the decisions. To be so obviously incapable of making certain decisions, such as when to hold an election (after teasing for so long that it was imminent), to "what's my favourite biscuit", is the sign of no leader.

The man who boasted of abolishing "boom and bust" had a whole team behind him, many of them are with Ed Miliband (and includes him).  Why would anyone trust them at all to lead a TV quiz show team, let alone lead a government?

Berlin Wall : Kristallnacht : Remembrance Day

25 years since the fall of the Berlin Wall is also 76 years since Kristallnacht, the "night of broken glass", when the Nazi pogrom against the Jews entered a new phase.

Both events buffer periods of German history that pretended they were the antithesis of each other, when in fact they were different aromas from the same poison.  The poisonous belief that human beings exist not for their own ends, but for some "greater good" that they may readily be sacrificed for.

Tolling Auckland motorways

I know a bit about road pricing.

So I've been following the debates about tolling Auckland roads for many years, and so given the latest stories it's time for some very clear thinking about the proposals being floated by "independent advisors" to the Mayor of Auckland, because it's very easy to give a kneejerk reaction to the idea.

So here's the quick and dirty summary of what it is all about:

• Len Brown wants to spend a lot of money on (mostly public) transport projects that will lose money.  He doesn't have the money to do it.  His usual way of raising money is from ratepayers, and ratepayers don't want to pay for it.  
• The projects he proposes will never generate enough money from fares to pay for the cost of operating the trains and buses, let alone pay for the capital costs of building the infrastructure. They will lose money, because Len knows that if he confronted users with those costs, they wouldn't use the services.
• Central government isn't keen to spend national taxpayers' money on these services for the same reason, and because the net economic benefits are at best heroically optimistic.   At worst it is a transfer from taxpayers to a tiny fraction of Auckland commuters (and a few property owners who will gain increased value).

So Len has some pet projects he can't convince the users to pay for, or Auckland ratepayers to pay for, so he wants to tax road users to pay for them.

Now local authorities are permitted to toll any new road capacity they build, under certain conditions and with central government approval.  The key element being that it is new capacity, and the money raised is used to pay for the road improvements.  That's not what Len wants to do, he isn't interested in the approach of Oslo, Stockholm or Sydney, in charging road users to pay for improved roads.  He wants to charge them for improved railways.

The problem is that road users already pay to use the roads.  The roads he wants to toll, aren't his. The motorways are state highways paid for by central government, and fully funded by taxes on the use of roads.  All fuel tax, all road user charges and motor vehicle registration/licensing fees go into the National Land Transport Fund, and fully fund state highways.  Those taxes are enough to keep the motorways maintained and to fund expansion and improvements around Auckland.  They also pay half the cost of the roads Auckland Council does control (the rest comes from rates).

So Len wants Auckland motorists to pay more to use roads that aren't his responsibility, so that he can build some grand projects that will lose Auckland ratepayers money (he'd like the motorists to pay for those losses too) and wont generate net economic wealth.

Arguments that the motorists will benefit are grossly exaggerated, since very few motorists will switch from driving to using these services and Auckland Council has long given up claiming it will clear the roads - it wont, it doesn't.

The funny thing is that charging motorists directly would make sense, to reduce congestion simply by applying market pricing.  At peak times scarce road capacity should cost more, because demand exceeds supply.   If priced efficiently, traffic congestion would largely be avoided, and enough money might be raised to build more capacity.   Conversely, during off peak times it would be much much cheaper, as there is ample unused capacity and it makes sense to encourage greater use at those times to generate revenue.

That could be achieved by replacing the current flat fuel tax and RUC system with a pricing system, that would reflect demand and supply.   If the motorways were run like a business, that could happen.

Cheaper motoring off peak, less congestion at the peaks, buses could flow more freely at peak times and could expand services to meet demand from those who find driving too expensive.  More mobility, less emissions and yes more public transport, though not the kind some planners embrace, but the kind driven by what users want.

However, it wouldn't include Len's train set, and so he wont embrace that sort of solution for Auckland.

The government should tell Len quite simply no - he can't toll the motorways that are not his, to pay for his pet projects.  He might consider instead running his own roads more like a business, and lobby government to do the same for its roads, even selling the Auckland Harbour Bridge as a test case.

but I bet he wont...

NZ election 2014 post-mortem

Every election that comes about inevitably has some hacks saying it is “interesting”, “historic” etc, which of course they always are.  Elections always change governments in some way, even if not the ruling party. Psephologists (an area that I am often tempted to drop into) are keen to dissect some greater meaning from a vast range of individual decisions made at the ballot box or to not go to the ballot box, and political parties are even more keen to use that data to inform their future utterings of rhetoric, promises and contortions of fact.

The 2014 New Zealand General Election is, though, a bit more than all that.  For it needs to be seen in the context not only of 20 years of MMP politics, and an vigorous level of campaigning by opposition parties, that saw many pundits thinking the election would be close, either due to wishful thinking on their part, or because governments seeking a third term usually only scrape through (see 2005, 1996, 1981). 

In the height of economic recession, a majority of voters chose to change the electoral system, thanks to sustained campaigning by a coalition on the left, poorly focused counter-campaigning by those on the right (remember Janet Shirtcliffe?) and the feeling by a significant number of voters that they had had enough of radical reforms they neither understood nor felt were helping them.  Bear in mind in that same election in 1993, National won by one seat, with 33% of the vote.  First Past the Post meant that opposition votes were split between Labour, the Alliance and NZ First.

Today, opposition votes are also split between Labour, the Greens (which have succeeded the Alliance as the far-left faction in Parliament) and NZ First, but National has won an election in its own right, with the system many on the left thought would deliver them sustained so-called “progressive” majorities of Labour supported by a leftwing partner, and perhaps a centrist party maintaining a balance.  Not now.  Despite a campaign whereby the left DID campaign on a lot of policy, and dishing up a fair bit of dirt, a majority of New Zealand voters weren’t swayed.   National getting its best ever result since 1951 and Labour its worst since 1922 speaks volumes not of the split on the left (which has not grown, as the Greens are sustaining fairly consistent levels of support), but on a series of factors that should result in some introspection, particularly from the left...