Dow Jones
Tuesday September 16, 7:56 PM AEST
Australia's Qantas Slashes Fares On Trans-Tasman Route
SYDNEY (Dow Jones)--Qantas Airways Ltd. is to drop its business class service and slash economy fares between Australia and New Zealand, making for one of the most competitive periods ever seen on the busy trans-Tasman route.
The Australian airline, which is struggling to get regulators to approve an alliance with trans-Tasman rival Air New Zealand Ltd. said Tuesday that from Oct. 15 its cheapest return fare between Sydney and Auckland will be A$451 including taxes and charges, down from its current year-round fare of A$675 upward.
One way fares between Sydney and Auckland will start from A$243, including taxes of A$64.
Fares will also become more flexible, with the airline removing minimum stay periods, advance purchase conditions and seasonal surcharges.
A Qantas spokesman declined to specify what proportion of Qantas' seats would be offered at its new cheaper rates.
The new fares are close to those recently announced by Air New Zealand and according to some industry observers, the fare cuts should be construed as an attempt to bully regulators into allowing its purchase of a 22.5% stake in Air New Zealand.
"This is a clear signal that if you (the regulators) don't pass this deal we are going to destroy Air New Zealand," said one industry participant.
The Australian Competition & Consumer Commission last week blocked the Qantas-Air New Zealand alliance proposal, concluding it would lead to increased fares, reduced capacity and poorer services on the route.
The two airlines have said they will appeal the decision with the Australian Competition Tribunal, but this process may take up to two years. A New Zealand competition watchdog is expected to give its own ruling on the deal later this month.
Qantas and Air New Zealand account for about 90% of the trans-Tasman market, but are having to adjust to fresh competition from new entrants. Emirates Airlines (C.EA) began offering trans-Tasman services last month and Australia's budget domestic carrier Virgin Blue is expected to begin flights to New Zealand later this year.
Polynesian Airlines of Samoa, Aerolineas Argentinas, Thai Airways International PCL and LanChile S.A. also offer limited services between Australia and New Zealand.
"Certainly there is a lot of competition on the Tasman, but all of that seems to be focused on Auckland," said David Huttner, Virgin Blue's head of communications and strategy.
Though coy about exactly when Virgin Blue will begin flying to New Zealand, Huttner said the airline is looking most closely at New Zealand's second and third largest cities, Wellington and Christchurch.
"We are sure that with our imminent arrival on the Tasman, today's announcement by Qantas is no coincidence," he said.
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