Routes across the Tasman Sea between Australia and New Zealand are heading for a three-way showdown between low-cost carriers Freedom Air, JetStar and Pacific Blue.

JetStar, the Qantas subsidiary, has accelerated plans to launch New Zealand flights, where it will compete with Air New Zealand’s Freedom Air and Virgin Blue’s overseas arm Pacific Blue. As recently as April JetStar was predicting it might be two more years before it started overseas routes because its first priority was to build its Australian network.

Since then, however, JetStar has moved up its New Zealand launch to no later than this December. It will announce specific routes in August, but stresses that it will concentrate on leisure routes that complement Qantas.

JetStar has not explained why it accelerated its New Zealand plans, but two reasons are likely. Both Qantas and Air New Zealand are struggling to compete with the so-called “fifth freedom carriers” for leisure traffic across the Tasman. These are the Asian and ­Middle Eastern airlines who operate trans-Tasman flights to avoid leaving their aircraft parked at Australian airports all day.

The timing and pricing on these flights are attractive to leisure travellers, and erode the yield of full-service carriers such as Qantas. With lower costs, JetStar is better able to compete for this traffic. The Qantas group also has extra aircraft. When Qantas launched JetStar Asia last year, it diverted some Airbus A320 deliveries from JetStar to its Singapore startup. Now JetStar Asia faces excess capacity due to delays in securing landing rights. JetStar can use these jets on the Tasman without interrupting its own domestic growth.

The trans-Tasman strategies of JetStar and Freedom Air will differ from Pacific Blue’s. JetStar and Freedom will skirt hub-to-hub routes to avoid competing with their parents. They will fragment the market with secondary routes such as Hamilton-Sydney and Auckland-Newcastle – city-pairs that Qantas and Air New Zealand do not fly. Pacific Blue will mostly do the opposite, illustrated by its recent launch of Auckland-Brisbane flights. It will serve some leisure markets too, but has no reason to avoid the hubs.

Air New Zealand has been slower than Qantas to ensure that its low-cost subsidiary does not compete with the parent airline. As recently as March Air New Zealand and Freedom Air were still flying some of the same Tasman routes. Qantas has adhered to a strict policy of keeping JetStar off city-pairs operated by Qantas, and it will continue to do that.

JetStar will be the eleventh carrier operating scheduled flights across the Tasman Sea.


Source: Airline Business