Wednesday, November 12, 2014

Airline closure shows non financial measures have a financial impact

The Wairarapa lost its direct air service from Masterton to Auckland in February 2014. The carrier had determined that despite company wide record profits, the route was not profitable. The carrier had determined that the route was not essential to the Wairarapa because commuters could drive to Wellington airport and get a cheaper flight to Auckland.

Hundreds of Wairarapa and Wellington residents cross the Rimutaka Range daily for work. The drive is something they accept as a cost of conducting their business life. Many thousands more take the train and consider this option to be more suitable for their necessary commute.

Commuting by car or train with rural living in the Wairarapa and city employment in Wellington are choices they are happy to have made. The choice of flying from Masterton or Wellington to Auckland was always available to commuters but now that choice has gone. For those who chose to travel to Wellington, nothing is lost. But for those who made up part of the 87% loadings when they chose to use the Masterton flight, much has been lost.

All the arguments for removing the air service to date have been financial but the impact on the Wairarapa is far more than can be recorded on a P&L.

  • cheaper air fares from Wellington
Fares may well be cheaper out of Wellington but what about the added cost of:
  • travel time
  • petrol
  • vehicle wear and tear
  • parking
  • away from home meals
Based on minimum wage hourly rates, parking at $18 per day (which you'd never get) and AA's recommended 90c per km rate of wear and tear then a return flight from Wellington to Auckland would need to save you $220.00.

But then there are the personal non financial measurements too!
  • stress of getting up at 4.30am to get to Wellington on time
  • stress of driving in peak hour
  • not seeing the kids off to school
  • not home in time for dinner
  • not home to tuck the kids into bed
  • an airport fast food meal
  • stress of getting home at 9.00pm
  • too tired for work tomorrow
Each traveler would need to determine what the value of these elements are to them. For me I'm happy to pay another $200 for me and my staff to be able to fly out of Masterton. As an employer I can see these non financial measurement having a severe financial impact on my business:
  • tired staff are not engaged
  • stressed staff can't focus
  • staff not having family work balance are not happy for long
  • staff that are tired, stressed and don't have work life balance don't stay
  • fast food meals are not as good as home meals; on many levels
  • too tired from extra travel and time in lieu is needed to compensate
From my calculations I'd be happy to pay an extra $200 each way on a flight from Masterton to Auckland.