The tussle between the state and private enterprise has been a continuous theme in New Zealand’s aviation history. Relegated to a secondary role behind the state’s virtual monopoly at the end of the Second World War, private enterprise triumphed by the end of the century.
Restricting air services to licensed operators began in 1934 and continued until 1990. From 1951, licensing was in the hands of the Air Services Licensing Authority, which judged applicants on a range of criteria, including the effect of proposed services on existing airlines. Although it was government policy during the 1960s and 1970s to develop civil aviation as a mixture of public and private enterprise, in practice, the authority’s judgements safeguarded NAC’s and later Air New Zealand’s main trunk services from competition.
The most determined challenges to NAC’s monopoly came from South Pacific Airlines of New Zealand (SPANZ), and Mount Cook Airlines. Between December 1960 and February 1966, SPANZ served many provincial towns in both islands, before going into receivership. From 1961 on, Mount Cook Airlines catered more successfully for the growing number of tourists at locations such as Rotorua, Queenstown, and Mt Cook. Complementing rather than competing with the state airline, Mount Cook Airlines became a subsidiary of Air New Zealand in 1991.
A number of small airlines came and went in the 1950s and 1960s, including NZ Tourist Air Travel, Midland Air Services, Bay of Plenty Airways, Golden Coast Airlines, West Coast Airways and Southern Scenic Air Services. More substantial companies, such as Air Nelson and Eagle Airways (which became part of Air New Zealand Link in 1991) and Origin Pacific Airways, found greater scope in the last quarter of the century. As the state employed fewer and larger aircraft, there was more opportunity for private companies to enter the provincial routes, using smaller aircraft.
The profit motive
Commercial conditions were also becoming more favourable to competitive private enterprise in aviation. Even before its merger with Air New Zealand in 1978, NAC had been steering towards a more commercial mode of operation, less constrained by the public service objectives of the 1945 National Airways Act that had established the airline. Air New Zealand, as a limited liability company, was always freer to make unfettered commercial decisions.
In the 1980s competitive private enterprise gained pace. New licensing rules rendered Air New Zealand’s dominance in domestic services more contestable than at any time in the previous 50 years. In 1986 the government opened domestic airlines to foreign ownership. Air New Zealand immediately faced significant competition on the main trunk route from the Australian airline, Ansett (NZ), and later from Qantas (NZ). In 1989 Air New Zealand itself was sold to a consortium led by Brierley Investments Ltd, only to return to partial state ownership after facing collapse in 2001. The long post-war phase of state-owned air services, however, had effectively ended.