An alliance between Air New Zealand and Virgin Blue in the transtasman market has symmetry and will concern Qantas and its budget airline Jetstar, according to the Centre for Asia Pacific Aviation.Air New Zealand and Virgin Blue said yesterday that they h
An alliance between Air New Zealand and Virgin Blue in the transtasman market has symmetry and will concern Qantas and its budget airline Jetstar, according to the Centre for Asia Pacific Aviation.
Air New Zealand and Virgin Blue said yesterday that they had been in talks for months about commercial co-operation in the transtasman market but no agreement had been reached. Commentators suggest a code share is more likely than any changes in ownership structure.
The centre saw symmetry because 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. Any co-operation by it with Virgin Blue would greatly concern Qantas and Jetstar.
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.
The competition implications of Air New Zealand forming an alliance with Virgin Blue 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 transtasman 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.
It noted previous attempts by Qantas and Air New Zealand to work together did not work out but that former Qantas executive John Borghetti was an architect of them, and he was moving to Virgin Blue.
Another challenge was that Air New Zealand was still firmly a government-owned airline. That made strategic change "a whole lot more complicated."
