Call to launch Otago Air

Fred Doherty.
Fred Doherty.
A Dunedin man has called for the city to ditch major airlines, ''do the job ourselves'' and begin a local air service providing international flights.

And the idea for city residents and organisations to get together and develop ''Otago Air'' has been declared ''possible'' by a former airline boss.

•  Read opinion piece here

Outram farmer and cafe owner Fred Doherty has responded to recent news Virgin has grounded Dunedin's only flights to Sydney and Melbourne.

The move by Virgin, which has a transtasman alliance with Air New Zealand, left Dunedin to Brisbane as the only international flight from Dunedin.

Mr Doherty has made clear he is a ''dreamer'' but, in an opinion piece for the Otago Daily Times, he has called for organisations from the Dunedin City Council to the Otago Chamber of Commerce to get behind his idea.

Setting up Otago Air would involve floating a company to lease a plane and pilots, giving the city direct services to Australian cities, promoting the city and attracting tourism.

Funding would require 1000 people investing $1000 each for start-up capital of $1 million, an investment that could be returned in the form of air fares.

''If you are going to dream, dream big,'' he said.

''Nothing will happen if someone doesn't start the ball rolling,'' he said, adding he would put up the first $1000.

Former Kiwi Air chief executive Ewan Wilson, now a Hamilton city councillor, said the idea was not out of the question.

Kiwi Air collapsed after intense competition and Cr Wilson was later convicted of fraud.

He said yesterday the model he used could work.

That meant starting up a ''virtual airline'', as Kiwi Air did.

The company would lease planes and pilots from a nearby high-frequency airline with the necessary infrastructure and capacity.

''You then negotiate with them to operate your service, with your brand.''

That model meant less capital was required, and less time, because issues such as regulatory approval were the leasing airline's responsibility.

There was a cost, as that airline would take a profit.

But Cr Wilson said it could be done with a start-up cost of about $2 million.

As well, there was nothing to stop other cities left out of the international flight loop, such as Palmerston North and Hamilton, ''embracing'' the idea.

Regular flights might ''irritate'' existing carriers but might also prompt them to reinstate services.

''In a broader sense, that might not be so bad.''

Asked to respond to Mr Doherty's idea, Dunedin Mayor Dave Cull said Air New Zealand had said it had limited planes and pilots, and there was insufficient demand in Dunedin to push the city as a priority.

''That's the reality of it.''

However, the idea was ''not completely silly''.

Mr Cull said the Dunedin to Auckland route was the major problem for the city, because the schedule made it difficult to do business there in one day.

The high cost of the Dunedin to Christchurch route was ''Air New Zealand being quite cynical''. In a situation where there was no competition, ''they screw us'', Mr Cull said.

Mr Doherty said last night he was ''absolutely'' serious in a promise to put up the first $1000, and chair an inaugural meeting on the idea.

Air New Zealand did not respond to questions on the issues yesterday.

david.loughrey@odt.co.nz

Well said

As a famous airliner manufacturer founder said himself...

"Dream no small dream; it lacks magic.

Dream large.  then make the dream real."

- Donald Douglas founder of the Douglas Aircaft Corporation, which, incidentally were absorbed by Boeing. 

Equally well said Fred.

Like his thinking

I like Dunedin 1's thinking, that if investment were made into "the regions only current airline - which I may add is locally owned and operated by local pilots - there is no reason why they woulnd't be able to operate a small turboprop between Dunedin and Auckland."  
Rather than go big (risk big) why not see if a gradual increase in what's already here can work? Add more routes, more flights as the business trials in real time rather than acting on "projections" and "computer modelling" that in the end doesn't take account of changes in other people's/ companies'/government's reactions, either embracing the new services or altering their prices & routes to kill competition the way it usually happens.

Dunedin flights

There is enough demand locally for Boeing domestic flights out of Dunedin especially the Auckland late flight. I strongly suspect Air NZ is utilising its available aircraft for more premium paying profitable routes eg Queenstown. (This would equate to rescheduled flights I am aware at the moment Queenstown does not operate night flights). Jet star flying to Auckland at 8.30pm instead of 4.30pm would make good loadings, mind you their flight at 4.30 is already at capacity. They would fill a seond flight but are probably hamstrung with availabilty of another aircraft. Air Nz would quickly find another flight to compete with a locally funded flight or another flight put on later by Jet star. The cannot sqeeze Jet star out but rest assured with anyone else they would, remember Kiwi Air.

 

 

More competition

Marious: I completely agree, the city is at the edge of its debt limit, too much more and our credit rating drops, interest rates go up, things get harder to deal with, we're on the edge of a financial death spiral - at the moment world interest rates have been held artificially low because of the GFC, that won't last.

Mind you we will get rid of about 10% of the city's debt when the rugby community finally comes up with their promised $55m contribution for their rugby stadium.

If one did start ones own airline AirNZ will do what it's done before, drop its prices until the competition has been squeezed out, then raise them again, they have deep pockets and already have the planes.

The real solution to our dilemma is not to start our own airline but to attract more existing airlines to compete with AirNZ, and to do that we need to offer them a bigger market - if we fix our local economy the rest will follow.

So forget the airport, as annoying as it is to use, and keep your eyes on the prize, what we really need are more businesses that actually create new wealth in our economy, IT, small manufacturing, tourist destinations, forget about the service industries if real wealth is flowing they'll make themselves.

Problem solved

It's just occurred to me that the person with all of the answers to Dunedin's air service could well be Sir Eoin Edgar.  He has shown a strong interest in aviation matters recently and has publicly suggested shifting Queenstown Airport to the top of Queenstown Hill.  He certainly has a continuing strong interest in Dunedin with his sponsorship of the rugby stadium, and of course his company is still in Dunedin and must require all sorts of flights to bigger centres.  I can just see it now - a leased A320 decked out in the Forsyth Barr livery jetting round the country and off to Ozzie a few times a week in between times.  So much prominence for his company and being able to solve the problems of Dunedin would be a no-brainer I'm sure.  Hopefully Dave Cull will get on the blower to him asap.

Yes DCC should fund the airline

Marious - You need to be corrected on a number of things

1) The DCC is not broke. They can still employ hundreds of staff and have your street rubbish taken away, the pool open, many services offered and can pay down are great Stadium in 20 years. Sounds like you need to do some research into Greece to understand "broke" as you have missed the realities

2) If you don't think DCC should fund any business perhaps you want a garage sale of Moana pool, Delta, City Forests etc etc. A forward thinking council will invest in new business ventures to pay off more debt (and yes all business holds a risk but clever investment is critical).

3) You say current airlines "Can't make a go of it", well "not making a go of it" certainly does not mean the sector is not profitable. In reality the airlines will be seeking the "Most" profitable routes like Queenstown and redirect services to the big $$. A forward moving city can easily fund this and $2.5 Million works out at $20 per person. Please don't compare the Stadium which I have never expected to return a profit to a well managed airline venture which should easily return a profit through local support. Pretty clear in my eyes.

Making a go of it

Demand has been rising for seats, it's not that Air NZ can't make a go of it or that it's not profitable - they simply want to use the aircraft on routes that are more profitable so they cut ours. But the moment someone tries to pick up the slack watch and see how fast Air NZ puts in a subsidiary to supply cheap seats, I actually agree with speedfreak43 as soon as someone is willing to give a decent service Air NZ should have their landing privilages revoked.

It's not obviously profitable for Dunedin to have Air NZ. (Same argument they use to cut flights).

Joint venture with council

Its Me's comment leaves out the fact the council's broke. I would think joint ventures of this sort due to the amount of money that would really be needed to make this work successfully are out for the council for quite a number of years.

There appears to be quite a number who think our council is just a pot of endless capital that can be just dipped into at will. Ratepayers already have more debt than they can afford. Maybe Dunedin buisness could put up the money? A reasonable working plan that would make a return would be needed in this case. I take it thats why the council has been suggested?

If the current airline companies can't make a go of it  due to not having enough bums on seats to and from Dunedin then they are cutting services due to the harsh commercial realities. 

If this situation was to change for the better then I'm sure the services lost would again reappear. Maybe thats really the answer we should be looking for.

For sale or swap

Large waterfront property with harbour views. Fully covered and ideal for multipurpose use. (lol. yeah right).  A few years old but has seen very little use, so in as new condition.

Happy to swap for passenger airliner suitable for national and international travel. Must be smaller than a 747 and prefer late model with low mileage.

 

Hit the council up for the start up

The DCC should put in the start up. $1m? Look at the 10s of millions they are throwing away on rugby with the Forsyth Barr lemon. At least this will getting more people to the city on a more regular basis and give an immediate return to people in Dunedin that the rugby white elephant.

The answer to the problem

Air New Zealand couldn't undercut if their landing permit was revoked.

More to it

Hi Itsme: There is a whole lot more to running an airline than a timetable.  Rotorua is in just that situation with Air NZ. For example if the flight is under capacity, which on a larger aircraft is common, the ratepayer has to pay a levy for each seat.  In other words the Council guarantees the capacity or underwrites the flight. I am told can be as high as $40k per trip. The Council also pays advertising overseas and the huge cost of Customs and bio security. plus ground handling. In short the aircraft can't lose, we can though. $60m down and around $9.5m per year for a white elephant .. If the airline can't make it profitable, think again. 

Support of the locals

Just a few side notes from a local businessman wanting to put his 2 cents in.

* Does anybody on here know the logistics, time, and money involved in starting up an airline? The start up cost in bring an airline from paper to the air would surely invole more money than $1 million start up.

* Second major point is why would you try something that has already been tried by a well established airline company which has been there, tried those routes and and obviously found they weren't financialy viable?

From what my small amount of research has gathered, ff you were to "throw" $1 million towards the regions only current airline - which I may add is locally owned and operated by local pilots - there is no reason why they woulnd't be able to operate a small turboprop between Dunedin and Auckland.

The question is do we want to risk the success of our region's local airline who "do the job themselves" by starting another? Or should we invest our money in them? I'm sitting on the fence with this but I know if I was going to invest $1000 I'd invest it in a local company which already has its feet on the ground, so to speak.[Abridged]

The Problem

The problem is as soon as a service starts up Air NZ puts a cut price service in and undercuts the new comer until they go out of business and then reverts to its overpriced sub-standard service. They have done this time and time again

Joint venture with DCC is the answer

I have the best answer to how this can work. Firstly the most common sense way would be for the DCC to be involved in owning this (like city holdings, Forests, Delta and other DCC businesses) and go into partnership with for example the Hamilton City council to fund this venture. Rather than $1000pp and the dogs breakfast that would create, it needs to be funded by the city as a whole.
The reason why we can join with another similar sized city like Hamilton is that it has a similar sized population and we simply don't need daily flights from Dunedin to Australia (meaning unused aircraft at a cost). The profitability of airlines comes with aircraft in the air not on the ground. Heres what it could look like: Sat, Dun - Syd return; Sun,  Dun - Mel return; Mon,  Ham - Syd return; Tue, Dun - Syd return; Wed, Dun - Syd; Thu, Ham - Mel; Fri, Ham - Syd.
The DCC can then operate as a profitable venture and if it eventually failed they could withdraw, but I feel failure is unlikely. The cities can easily invest $5 Million as a start up ($2.5M each). Rather than Otago airlines it cound be called Provincial Airlines or something that could include other cities over time like Tauranga etc.
Pretty simple really, and then we all have a stake in it and can all share in the success rather than a small group. We all share in the benefits it brings the city and the profits it generates. Lets do it.

Looking for $100m

Excellent.  QsRC, I suspect, is willing to donate or invest let's say $50m into this really forward looking idea of leasing an aircraft able to fly international routes.  Glad to see that the same spirit applies to his equal investment into another project in Awatea Street.  I am assuming that this already has been deposited?  Heaven forbid that anything would prevent QsRC from such wise and optimistic putting his money where his mouth is...or did you ever just wonder why the really rich people in Otago have not done this already?

Oh dear

The Dunedin anti progress league has a new target!

 

Why Not Mainland Air?

If people are that sick and tired of Air NZ then get together and express their interest to Mainland Air, there is no use re-inventing the wheel with another airline when Mainland is able to provide a service, they have just started a service from Oamaru to Christchurch and it is very well priced, there is no reason why they couldn't operate a small turboprop from Dunedin to Auckland if the interest is there.

If you want change get of your backsides and make it happen. 

Google the cost of leasing an aircraft

Ah Fred....it takes very little time on the internet to find out a few facts about leasing aircraft.  I assume that you are not proposing purchase.  So once you have dealt with the question of whether you want a wet lease (comes with crew), identifying the a/c, getting it to Dunedin, arranging servicing, parking fees and other airport charges, terminal change costs, filling the thing with avgas, employing cabin crew, marketing and the myriad of little things like certification etc, then you are still faced with fixed lease costs whether you fly or not, or are full or not.  Currently a Boeing 737 runs at over $US280,000.  This million you are talking about would be consumed many times over before the aircraft was found, let alone arrived.

The answer is not, I'm afraid, an alternative airline and I can just imagine Air NZ's reaction to a proposal such as still envisaged by Ewan Wilson to lease out one of their aircraft as a "virtual" airline.  If Dunedin was a place where a lot of business was happening (ie a place where a lot of other New Zealanders needed to come to to do business) then things would maybe be different, but the reality is the reverse.

'They screw us'

Oh dear Dave, you're not wrong but I'd thought you'd know better than to say it to a media outlet by now. As soon as Air NZ lawyers read that the lawyers will be in touch. Wise up man...oh, too late. [Abridged]

Clear on the concept

This idea comes around every few years or so.

Kiwi Air collapsed after intense competition and Cr Wilson was later convicted of fraud." is the key paragraph in the article.

Every initiative like this has died because as soon as you try to start up, you suddenly encounter protective competition.  The startup is then unable to gain critical mass to meet its initial costs and goes under within 6 months.  The competitor airlines then revert to standard pricing.

Unless a new startup has something up its sleeve (and nothing short of full regulation will work), then it is doomed to the same fate.

I'm continually amazed that a city that on the one hand says "we are digital ready and can work from anywhere" also cries out that they can't get to anywhere else. 

great idea, wrong council

Come on Dunedin, would love to see this get off the ground. I pledge the first $1000 from Southland. Be nice to see the mayor and a few of those councillors getting behind the idea. Oh thats right, I forgot, they dont like big investment projects in their city.

Well Done Fred

Good on you Fred for dreaming ... But sadly $1 million wouldnt scratch the surface of even  the paperwork. Take the example of Rotorua who also had that dream. Now it has no International service save two flights per week, but only in the seasonal months. The present council debt to achieve this? $60 million dollars plus an interest bill and Koha to Air NZ of around $9.5m per year.  Its bums on seats Fred, even the big boys are struggling.
I used to swim at the Outram Glen, nice little place. Go Well.

Use Mainland Air

If people want to throw money at a risky investment like that they should at least use Dunedin's only existing airline and pay the rental for them to get a jet for the Dunedin to Auckland route and maybe Australia.  Mainland Air have often tried new routes in Otago so it would be interesting to see what they could do with a larger aircraft in order to give them economy of scale.

Either that or expand the runway and try to attract international flights that want to go to Queenstown but whose planes are too large to land there.  Then bus the people from Dunedin to Queenstown. 

 

Awesome idea

I like it. And I agree with Dave Cull. Dunedin to Auckland flights would be in big demand for business.

i would put up $1000 

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