The Tauranga Business Case for Jetstar

for

The Tauranga Business Case

- WELCOME TO THE TAURANGA ADVANTAGE

for

Tauranga is New Zealand’s fifth largest city, the country’s fastest growing regional economy, one of New Zealand’s favourite holiday destinations and a hub for innovative, high-value businesses.

Air services are a vital component of economic development. As we had the privilege to share with you on your recent visit to Tauranga we have an increasing demand for competitively priced, frequent and reliable air services to and from Tauranga. We acknowledge the benefits Jetstar will potentially bring to Tauranga in terms of additional economic activity, healthy competition reflected in more competitive pricing, increased connectivity and competitive advantages over other regions. This proposal sets out the significant benefits Tauranga offers to Jetstar.

PAGE | 2

Andrew Coker | Chief Executive

Garry Poole | Chief Executive

Rhys Arrowsmith | General Manager

The Business Case for Jetstar to include Tauranga in their regional network is based on five unique value propositions each of which are backed up by the evidence and statistics outlined in this business case:

1. TAURANGA CITY HAS NEW ZEALAND’S HIGHEST RATE OF POPULATION GROWTH (OUTSIDE OF AREAS AFFECTED BY THE CHRISTCHURCH EARTHQUAKES)

2. TAURANGA IS THE EPICENTRE OF NEW ZEALAND’S FASTEST GROWING REGIONAL ECONOMY

3. TAURANGA HAS SUBSTANTIAL TOURISM GROWTH PROSPECTS WITH UNTAPPED PARTNERSHIP OPPORTUNITIES

4. TAURANGA HAS INCREASING DEMAND FOR MORE EFFICIENT AND AFFORDABLE CONNECTIVITY TO AUCKLAND

5. TAURANGA OFFERS A LOW COST / HIGH VALUE BUSINESS PROPOSITION

| The Tauranga Business Case

PAGE | 3

In comparison to the other regional centres being considered, we can boast highest population growth, highest passenger growth, highest regional economic growth, highest employment growth and largest out-of-main-centre tourism spend.

On top of all this we can offer Jetstar two high value, high demand routes to Auckland and Wellington, with the lowest airport charges in the country.

Welcome to the Tauranga Business Case for Jetstar!


for

Tauranga has experienced off-the-chart levels of growth since 1945 when we were a fishing village of 4,000 people. Today Tauranga is New Zealand’s fifth largest city at 121,800. Tauranga also boasts the fastest rate of growth of all the comparison cities Jetstar is considering. In fact, Tauranga has the fastest rate of growth in New Zealand outside of those areas affected by the Christchurch earthquakes.

EXCEPTIONAL POPULATION GROWTH | The Statistics

PAGE | 4

Source: Statistics NZ Source: Statistics NZ The Tauranga Business Case

for

Tauranga’s strong growth rate is projected to continue.

Of all the regional centres Jetstar is considering for its new regional network, Hamilton and Tauranga are expecting the largest population growth over the next 15 years.

In absolute terms there will be over 25,000 extra people living in Tauranga in 15 years time.

This will increase to 50,000 extra over the next 30 years.

PAGE | 5

Source: Statistics NZ

EXCEPTIONAL POPULATION GROWTH | The Projections


for

Air New Zealand has recognised the growth potential of Tauranga

When Air New Zealand announced major cuts to its regional network late last year, its Chief Executive highlighted Tauranga as a regional route with strong growth potential. Air New Zealand has since altered its strategy to take advantage of Tauranga’s growing market by progressively moving from a 19-seat aircraft to a 50-seat aircraft and then to a 70 seat aircraft.

Not only are we growing in population - we also have an expanding catchment for air services

PAGE | 6

EXCEPTIONAL POPULATION GROWTH | The Expanding Catchment

Airport Catchment Numbers

Tauranga 121,800

Western Bay of Plenty District 45,500

Eastern Bay of Plenty District 118,000

TOTAL CATCHMENT 285,300

Since then, Air NZ has ceased to operate at Whakatane. With the opening in July of the $455 million Tauranga Eastern Link highway travel time to the Tauranga airport has significantly reduced for residents of Whakatane, Ohope, Opotiki, Kawerau and Rotorua. This has effectively increased the catchment for Jetstar services at Tauranga Airport by almost 118,000 people. In addition, Tauranga is the closest airport for the 45,500 residents of the Western Bay of Plenty District (which covers the area just north of Tauranga right up to Waihi Beach).


for

Tauranga is the centre of New Zealand’s fastest growing region in economic terms. The Bay of Plenty’s economy grew by 4.8% for the year to March 2015, nearly double the New Zealand average. Continued economic growth is projected and continued population growth will support the Tauranga economy through downturns. “Tauranga looks to be in a good position to become an economic mainstay in not just the North Island but also the entire country.” (National Business Review, 29th May 2015).

The Tauranga economy is rapidly diversifying from its traditional reliance on primary industries and logistics, with business, job and population numbers increasing consistently year on year.

NEW ZEALAND’S FASTEST GROWING REGIONAL ECONOMY

PAGE | 7


for

Tauranga has led employment growth over the period 2004 – 2014 at 2%.

PAGE | 8


Source: Infometrics

Annual employment growth in the 2014-15 year was 6.3%, against a New Zealand average of 3.5% (MBIE), with a 28% increase in skilled vacancies (MBIE) and a 50% increase in jobs over $100k (TradeMe).

Regionally, the Bay of Plenty also leads all other regions at 13% for the 2004-15 year.


for

Increasing our connectivity to Auckland

There is evidence of the increasing connectedness of the Auckland and Tauranga economies. This is reflected in the 39% growth in air travel in the last five years.

Tauranga is increasingly seen by middle to high income Aucklanders as a viable alternative that can provide a better, more affordable lifestyle whilst still providing employment or business relocation options, or the option to live/work part-time in each city. These are people who have business or family connections outside of Tauranga and have disposable incomes.

PAGE | 9

"There is very strong demand from out of town buyers with approximately 60 per cent of all people at open homes now from Auckland." (QV Home Valuer, BOP Times, July 2nd 2015).

A key constraint to the acceleration of this Auckland-Tauranga connectivity is the road journey time and the lack of competitively priced air travel.



for

“Priority needs to be given to [improving] the travel time between Auckland and Tauranga. It seems to me it’s a crucial link.”

Professor Frank Scrimgeour, Institute for Business Research, University of Waikato.

“We have around 8-12 people per week commuting between Tauranga and Auckland, there is a mixture of flights and cars. Jetstar flights would appeal if they were at a competitive prices and business times.”

Craigs Investment Partners

“We have 10-20 staff travelling to Auckland each week using a mixture of driving and flying. We would welcome greater competition.”

Lain Jager, CEO Zespri “We would support the business case for Jetstar to come to Tauranga. Our primary concern would be our need for on-going connectivity to regional New Zealand so the cost benefits would need to be realised in the context of our total journey.”

Vince Hawksworth, CEO Trustpower

“We would welcome increased competition for air services, particularly on South Island connections from Tauranga. Currently it takes me longer and costs more to get to Timaru than it does to Sydney.”

Mark Cairns, CEO Port of Tauranga

PAGE | 10



for

New tertiary campus for Tauranga

In May this year the University of Waikato Council settled a heads of agreement with the Bay of Plenty Regional Council, Tauranga City Council and Tauranga Energy Consumer Trust that will see the development of a new tertiary and research campus in Tauranga’s city centre. It's expected 8000 tertiary students would study here over the coming 17-year period.

Construction is expected to start early 2018 with the new campus open for the 2020 academic year. The new campus is predicted to generate $133 million in regional revenue and provide over 600 new jobs. It will also add further vitality to the city centre and will strengthen the business case for other projects such as the development of an international hotel and conference centre, as well as student accommodation – all of which are drivers for increasing air travel demand into Tauranga.

PAGE | 11

International education in Tauranga

Education Tauranga is an association of learning institutions across the Bay of Plenty providing a range of learning opportunities (from primary to tertiary) to international students.

Education Tauranga is New Zealand’s fastest growing regional export education organisation, and has been instrumental to attracting the current 1,000 international students to the region. The organisation has experienced 20% growth in students moving to Tauranga in the last 12 months. All these students fly into and out of Tauranga airport on a regular basis and attract visiting friends and relatives.



for

Our competitive selling proposition as a Tourism destination

1. Mount Maunganui Main Beach has been awarded the best beach in New Zealand, 2nd best in the South Pacific and ranks within the

top 25 beaches in the world by Trip Advisor in 2014.

2. Mount Maunganui (Mauao) is an iconic landmark with deep Maori history and is popular with tourists. The “Mount” is where New Zealander’s come to holiday. Our region has the strongest regional domestic tourism base in the country, with a very strong repeat Visiting Friends and Relatives (VFR) market. 78% of our tourism market are domestic visitors.

3. Tauranga is New Zealand’s fifth largest and fastest growing city and offers a laidback sophistication with boutique shopping and a thriving café and restaurant scene.

4. The Port of Tauranga is the largest cruise tour port destination in New Zealand. Over 80 Cruise ships visit each season, with over 166,000 passengers and 70,000 crew forecast for the 2015/16 season. Cruise ship visitation has grown 600% in the last 10 years.

5. We are the gateway to leading tourism activities including New Zealand’s only active marine volcano Whaakari (White Island), Hobbiton and Rotorua which are all within a 45 minute driving distance.

6. The “Bay of Plenty” as the name suggests is plentiful in agriculture and marine life. It is the home of New Zealand’s kiwifruit, avocado and Manuka honey industries, with pristine coastlines renowned for abundant seafood.

7. The Bay of Plenty is officially the sunniest place in New Zealand, offering clear blue skies and consistent warm weather.

8. Ohope is New Zealander’s favourite beach as voted by kiwis in the 2014 Automobile Association “New Zealand’s favourite beach” awards.

SUBSTANTIVE TOURISM GROWTH PROSPECTS

PAGE | 12


for

Tourism Bay of Plenty is currently the 6th largest tourism region in New Zealand (by visitor spend). We are the largest regional centre after Auckland, Wellington, Queenstown, Christchurch and Hamilton/ Waikato. At the last reported period (March 2014) visitor spend in the region was $585M made up of $458M domestic spend and $126M international spend.

Australia is our key international market (40%), followed by UK (15%), Europe (10%), USA (10%) and Asia (4%). At $126M in international visitor spend there is much room for growth in this market and we have an active International Marketing programme, aligned with Tourism New Zealand’s international activity. This is focussed on Australia, North and South America, UK & Europe, India and Asia.


The Bay of Plenty region has set a growth vision to be a $1 billion tourism industry by 2030 (measured by visitor spend). This target is supported by additional local government funding and a marketing plan for maintenance of our domestic market strength and growth of international markets.

PAGE | 13

Tourism Visitor Spend


for

Growth in domestic visitors

The Bay of Plenty is where New Zealanders come to holiday and visit with friends and relatives. Domestic tourism makes up 78% of our market. This strength in domestic tourism is an important benefit to Jetstar as these are repeat visitors who visit at least annually.

Major Events Visitor

Numbers

Aims Games (National Olympics for Intermediate Schools) 9,500

Garden and Art Festival 2,500

Arts Festival 2,500

Jazz Festival 5,000

Half Ironman 2,000

McLaren Falls Festival 5,000

Jetsprints 5,500

Tarnished Frocks & Divas 2,450

PAGE | 14


A key part of our strategy for increasing domestic visitor numbers is our commitment to growing our major events. Tauranga City Council has recently committed $7.7M to increase visitors to the region by developing Tauranga’s reputation as a major events destination.

The current events calendar shows existing and new draw card events that will stimulate visitor arrivals.

Currently none of these events have packages in partnership with Air New Zealand.


for

Growth in international visitors

The Bay of Plenty is officially the sunniest place in New Zealand, offering clear blue skies and consistent warm and fine weather. We are the home of New Zealand’s kiwifruit, avocado and Manuka honey industries and with pristine coastlines renowned for its abundant seafood, the Bay of Plenty is a popular destination for foodies and fishermen alike.

Our close proximity to the tourist hotspots of the North Island – Coromandel, Taupo, Rotorua, Hobbiton and White Island - makes Tauranga the obvious gateway for travellers wanting to access the surrounding regional tourism offerings.

PAGE | 15


Tauranga is the largest cruise tour port destination in New Zealand. Over 80 Cruise ships visit each season, with over 166,000 passengers and 70,000 crew forecast for the 2015/16 season. Cruise ship visitation has grown 600% in the last 10 years.

There is enormous potential to tap into this growth as 25% of cruise passengers return independently in the seasons following their initial cruise. Tourism Bay of Plenty is actively targeting this market with a ‘Welcome Back’ campaign.


for

Untapped partnership potential

We are looking forward to sharing our domestic and international marketing plans with you to identify co-marketing/ promotion opportunities.

Our marketing programmes are focussed on the shoulder seasons. Domestic advertising will commence in September to prepare for the summer peak season. Co-promotion opportunities with Jetstar could be planned for this period to capitalise on the seasonal peak that is experienced in our region. Jetstar’s plan to commence flights in December is ideal timing to offer access choice to the tens of thousands of visitors who flock to the Bay of Plenty for their summer break and to visit friends and relatives.

PAGE | 16



for

DEMAND FOR MORE EFFICIENT CONNECTIVITY TO AUCKLAND

PAGE | 17

A difficult and precarious drive

Although the Tauranga to Auckland sector is short in duration (with a flight time of 35 minutes) this sector can no longer be considered a marginal driveable route. Being home to the country’s busiest port has resulted in a significant increase in the number of trucks using both SH2 and SH 29/1 between Auckland and Tauranga which has both slowed the journey and increased safety issues.

Auckland motorway congestion has worsened to the point where a three hour, or longer, drive to Auckland is now the norm rather than the exception. The reality for many Tauranga business people is that meetings either need to be squeezed into a short window to avoid peak congestion times or they must stay overnight to make the most of their trip.

Unlike Hamilton to Auckland, where the recent $2.5 billion dollar investment in the Waikato expressway has significantly improved safety and reduced travel times, Tauranga remains a difficult and often precarious three hour, or more, drive with no prospect of significant investment in the state highway network on the horizon.

According to the Kiwi Road Assessment Programme both routes between Tauranga and Auckland (State Highway 2 between Tauranga and Katikati and State Highway 29 over the Kaimai Ranges) are rated the worst of the five risk categories in terms of safety.


for

The Tauranga business case is predicated on providing additional capacity and affordability to two high demand, high value routes; Tauranga – Auckland and Tauranga – Wellington.

There is an opportunity to operate on both the Auckland and Wellington sectors with one aircraft and still get good exposure to peak fares, shaded yellow below. This schedule would result in 8 hours flight time for each aircraft per day.

PAGE | 18

0615-0650 0650-0705 0705-0740 0740-0755 0755-0910 0910-0940 0940-1055 1055-1110 1110-1145

TG-AA TURN AA-TG TURN TG-WN MEAL WN-TG TURN TG-AA

1615-1730 1730-1745 1745-1820 1820-1835 1835-1910 1910-1925 1925-2000 2000-2015 2015-2050

WN-TG TURN TG-AA TURN AA-TG TURN TG-AA TURN AA-TG

TAURANGA’S LOW COST / HIGH VALUE BUSINESS PROPOSITION

1145-1200 1200-1235 1235-1250 1250-1325 1325-1340 1340-1415 1415-1430 1430-1545 1545-1615

TURN AA-TG CHANGE TG-AA TURN AA-TG TURN TG-WN MEAL


for

Tauranga to Auckland

Flying to Auckland is becoming the preferred mode of travel. Despite the high air fares, load factors are consistently high and increased capacity is always taken up very quickly. Capacity on the Auckland sector has increased from 228 to 540 seats on week days over the past 10 years with very few “cheap seats” ever being available. According to Saber data 145,000 passengers travel this sector each year.

Our proposal would provide ten additional flights between Tauranga and Auckland each day, five of which would be at peak times as indicated in yellow below.

Tauranga Auckland Auckland Tauranga

06:15 06:50 07:05 07:40

11:10 11:45 12:00 12:35

12:50 13:25 13:40 14:15

17:45 18:20 18:35 19:10

19:25 20:00 20:15 20:50

PAGE | 19



for

Tauranga to Wellington

The Tauranga to Wellington sector currently has the highest load factors out of Tauranga. Air New Zealand operate four Q300 services each week day covering the 1 hour 15 minute flight. Capacity on the sector has increased from 240 to 400 seats on week days over the past 10 years. According to Saber data 106,000 passengers travel this sector each year.

The current Air NZ schedule is inconvenient to Tauranga business travellers, with direct flights to Tauranga leaving either too early (3:20pm) or too late (6:55pm).

Our proposal would provide four additional flights between Tauranga and Wellington each day, two of which would be at peak times as indicated in yellow below.

Tauranga Wellington Wellington Tauranga

07:55 09:10 09:40 10:55

14:30 15:45 16:15 17:30

PAGE | 20



for

Improved international connectivity

Wellington Airport has confirmed that it is very supportive of Jetstar having a base in Tauranga because it improves connectivity to Jetstar’s domestic and international services to Melbourne, Sydney, Coolangatta and Nadi. From these ports, international connectivity further afield to Asia is also improved.

Wellington Airport’s Network Vision for improved connectivity is illustrated here and is explained in more detail in the supporting document.

CHC

AKL OOL

MEL

SYD

NAN

Current

DUD ZQN

CHC

AKL

NPE NPL

ROT/TRG HLZ

IVC

Jetstar – A320 Jetstar – Q300 Qantas Fiji

OOL

MEL

SYD

NAN NSN

Future

MEL

PAGE | 21



for

MEL

High value fares

The table below depicts average one-way airfares on direct Air New Zealand services ex Tauranga booked one week, two weeks, one month and two months in advance and uses the average fare over four surveys carried out from February to June 2015. There is no doubt that these sectors are high value for Jetstar.

BOOKED TRAVEL TIME AA WN

1 WEEK IN ADVANCE

PEAK $189 $287

CHEAPEST $124 $185

2 WEEKS IN ADVANCE

PEAK $156 $254

CHEAPEST $124 $179

1 MONTH IN ADVANCE

PEAK $143 $226

CHEAPEST $121 $156

2 MONTHS IN ADVANCE

PEAK $129 $174

CHEAPEST $110 $139

PAGE | 22



for

Lowest landing fees in New Zealand

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

$800.00

$900.00

Tauranga New Plymouth Nelson Napier PalmerstonNorth

Rotorua Hamilton Invercargill

$140

$180

$255

$376

$401

$410

$479

$850

PAGE | 23



for

$/LANDING 6 LANDINGS PER

DAY = TOTAL COST

PER ANNUM

COST ABOVE

TAURANGA PER

ANNUM

TAURANGA $140 $306,000 pa 0

NEW PLYMOUTH $180 $394,200 pa $88,000 pa

NELSON $255 $558,450 pa $252,450 pa

NAPIER $376 $823,440 pa $517,440 pa

PALMERSTON NORTH $401 $878,190 pa $572,190 pa

ROTORUA $410 $897,900 pa $591,900 pa

HAMILTON $479 $1,049,010 pa $743,010 pa

INVERCARGILL $850 $1,861,500 pa $1,555,500 pa

PAGE | 24

Enormous savings for Jetstar



for

No operational constraints

There are no operational constraints or barriers to Jetstar operating Q300 aircraft at Tauranga Airport.

The full range of IFR departure and arrival procedures is available.

Within the terminal area there is space allocated for check in and kiosk facilities for a second carrier.

Our master plan anticipates future extensions with capital costs covered by our operating surpluses.

Overnight aircraft parking is available.

Baggage handling facilities are available.

Both Z and BP Jet A1 fuel is available.

Air Traffic Control is provided daily from 0630-2100.

Category 3 Rescue Fire Service is provided during hours of ATC watch.

Due to Tauranga’s sub-tropical climate and very high sunshine hours, most arrivals and departures are carried out visually, saving

both time and money. Missed approaches are a rarity and fog may occur once every two or three years.

PAGE | 25



for

Tauranga has a competitive advantage over all other regional centres across the following indicators.

| Tauranga’s Competitive Advantage

PAGE | 26

Tauranga Hamilton Rotorua New Plymouth

Palmerston North

Napier Nelson Invercargill

Population Growth (2006-2013)

10.5% 8.4% -2.1% 7.2% 2.9% 2.8% 6.8% 2.5%

Population Growth (2013-2043)

43.6% 41.7% -4.7% 22% 18.3% 4.9% 14.8% 3.0%

Regional Economic Growth (2015)

4.8% 3.3% 4.8% 1.2% 2.9% 2.4% 2.1% 4.0%

Employment Growth (2004- 2014)

2.0% 1.4% 0.2% 1.8% 0.5% 0.2% 0.8% 0.4%

Passenger Growth 5 years (2010-2014)

39% 0% 2% 27% 11% 20% 11% 6%

Passenger Growth 2 years (2013-2015)

14.0% -9.0% -1.0% 8.5% 4.7% 2.0% 5.2% 4.2%

Landing Costs (June 2015)

$140 $479 $410 $180 $401 $376 $255 $850 The Tauranga Business Case

for

for

Thank you for the opportunity to present the Tauranga Business Case to Jetstar.

We look forward to continuing this discussion and welcoming Jetstar to Tauranga!

www.thetaurangabusinesscase.co.nz

PAGE | 27

Documents

The Tauranga Business Case for Jetstar