Thurs "Australian Financial Review"
More flights to NZ mean cheap fares
Jul 31
Jane Boyle
Air travellers can look forward to discount fares on trans-Tasman routes towards the end of the year as newcomers, including Virgin Blue and Emirates, prepare to add up to 40 per cent capacity to the market and Air New Zealand launches a Tasman Express service.
Air NZ yesterday warned the extra competition would put fresh pressure on its profits and that should help its bid to convince regulators to drop their veto of its proposed alliance with Qantas.
Virgin Blue this week applied for slots to fly two daily services between Sydney and Auckland and daily services from Brisbane and Melbourne to Auckland during the northern winter. It is also seeking slots to fly daily between Sydney and Wellington and from Brisbane, Sydney and Melbourne to Christchurch.
The low-cost carrier also received official designation this week as an Australian carrier, giving it access to Australia's bilateral rights with other countries.
Air NZ chief executive Ralph Norris said that while fare discounting would stimulate demand, the new services from Virgin Blue, Emirates and others were likely to result in overcapacity on trans-Tasman routes.
"We will obviously see an increase in the number of people flying, but there will be a situation where some carriers are going to lose share," he said.
Mr Norris said that in the past year, Air NZ made its first profit on the Tasman in five years because it cut capacity by 12 per cent. But that profitability was likely to be eroded by the extra competition, which comes as Qantas is expanding its NZ subsidiary Jet Connect to the Tasman to cut costs.
Air NZ will respond later this year with the launch of Tasman Express, which Mr Norris said would use new A320 jets and result in a double digit reduction in operating costs on trans-Tasman routes.
He said Tasman Express would adopt some of the features of the airline's one-class, cut-price domestic service, Air NZ Express, but it would retain two classes on the Tasman.
Mr Norris said the airline had also requested proposals from Airbus and Boeing on replacement aircraft for its eight B747s and 12 B767s, as part of a sweeping review of its long-haul international operations. But he reiterated that the airline's long-haul international services could be in jeopardy if regulators rejected its proposed alliance with Qantas.
Mr Norris said the airline still hoped to convince the Australian Competition and Consumer Commission and New Zealand Commerce Commission that their veto of the deal was based on flawed assumptions.
He ruled out pursuing an alternative deal with Singapore, which holds about 5 per cent of Air NZ, if the Qantas deal was rejected. Asked what plan B was if plan A - the Qantas alliance - failed, Mr Norris said: "Go back to plan A".
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