A week after they disclosed they were in talks, Air New Zealand Ltd and Virgin Blue Airlines Group have announced plans for a trans-Tasman alliance.The plans include collaboration on future route and product planning, code sharing and frequent flyer progr
A week after they disclosed they were in talks, Air New Zealand Ltd and Virgin Blue Airlines Group have announced plans for a trans-Tasman alliance.
The plans include collaboration on future route and product planning, code sharing and frequent flyer programme benefits. The airlines said the agreement was not a signal of intention by Air New Zealand or Virgin Blue to take a shareholding in the other.
They will file applications with the Australian Competition and Consumer Commission and the New Zealand Ministry of Transport. The regulators are expected to take around six months to review the applications.
The proposed alliance would allow the airlines to strengthen their competitive offering on the trans-Tasman routes, the companies said.
It would deliver cheaper airfares, increased frequency, better connections, loyalty scheme reciprocity and expanded lounge access.
Virgin Blue co-founder and chief executive Brett Godfrey said the alliance would stimulate a new wave of competition in Australasian aviation. Incoming chief executive, John Borghetti, thoroughly supported this strategy, he said.
Air New Zealand chief executive Rob Fyfe said if the alliance was approved it would be one of several measures to improve the airline's competitive position on the trans-Tasman in the face of the Qantas group's two-airline move for regional dominance.
"Simple moves like integrating schedules, allowing customers to book multi-sector journeys on one code, providing reciprocal loyalty scheme benefits and reciprocal lounge access for qualifying customers will be a compelling proposition for leisure and business travellers on both sides of the Tasman."
Last week the Centre for Asia Pacific Aviation said an alliance between Air New Zealand and Virgin Blue in the trans-Tasman market would concern Australian airline giant Qantas and its budget airline Jetstar.
The centre noted previous attempts by Qantas and Air New Zealand to work together did not work out, but that former Qantas executive Mr Borghetti was an architect of them, and he was moving to Virgin Blue.
The competition implications were complex. The two airlines accounted for all of the trans-Tasman seats available from Dunedin. They also had a large collective share of the market between Cairns and New Zealand, the centre said.
But trans-Tasman flights to Auckland were well balanced between airlines and the market was highly competitive.
"The Tasman should not therefore be a major stumbling block from the regulatory perspective," the centre said.
Virgin Blue was a genuine low cost carrier evolving into a full service airline, while Air New Zealand was a full service flag carrier becoming low cost.
Air New Zealand needed to do something because it was uncomfortably positioned about halfway between Qantas and Jetstar prices.
Air New Zealand's main advantage was its comprehensive and seamless domestic network. The airline has been cutting capacity to increase load factors but was losing market share on Tasman routes as a result.
Another challenge was that Air New Zealand was still firmly a government-owned airline. That made strategic change "a whole lot more complicated", the centre said.
Air New Zealand and Virgin Blue said last week that they had been in talks for months about commercial co-operation in the trans-Tasman market but no agreement had been reached.
