Competition is coming to New Zealand's domestic skies in a big way, signalling the likely start of what Air New Zealand (ANZ) warned competition authorities could be a "war of attrition". As this struggle heats up, it has the potential to change the course of Australasian aviation.
Even as ANZ and Qantas appeal against the denial of their proposed equity merger, the two carriers are squaring off against each other in New Zealand. Qantas has signalled its intention to drop its codeshare with Origin Pacific and boost local flights with its own New Zealand-based discount unit, Jet Connect. By April, Qantas says Jet Connect will be flying 300 weekly flights within New Zealand. It is adding flights from Christchurch to Rotorua and Wellington to a network that already blankets most major routes.
Virgin Blue's Pacific Blue has also launched Australia-New Zealand services and promises to enter the domestic fray with its own flights later this year. When it does, that will import into New Zealand both of Australia's major rivals.
Origin Pacific, the other home-grown carrier after ANZ, is scrambling to find new offshore partners after its break-up with Qantas. It has signed a codeshare and interline deal with KLM, is talking to Pacific Blue about a similar pact, and seeks others. It denies any intent to go head-to-head with its bigger rivals, but it too is shifting capacity to the Wellington-Auckland trunk route.
Against this onslaught ANZ is struggling to retain its domestic base. It has already scaled back to a low-fare discount model that heavily relies on internet bookings. But it is conceding to its rivals domestic travel by foreigner visitors because it alone limits discount fares to New Zealand and Australian residents.
At the launch of Pacific Blue's trans-Tasman flights, Prime Minister Helen Clark declared: "Let the competition rip, because that is what aviation policy is about and that is in the interest of the New Zealand public."
The outbreak of competition has already claimed one casualty. Jumpjet Airlines, a potential start-up, admits its investors have cooled since Pacific Blue launched flights into Wellington, where Jumpjet hoped to form its base.
Australia's Qantas and Virgin Blue can send their surrogates into New Zealand under the Australia-New Zealand arrangement that grants cabotage to airlines from each other's countries. ANZ could reciprocate with domestic Australian routes, but has not ventured into that market since the collapse of Ansett almost pulled it down as well.
Source: Airline Business