New Zealand's second carrier, Origin Pacific, faces hard decisions about what kind of airline it should be as it tries to resolve its future.

Since April, when Qantas Airways dropped a codeshare deal on domestic New Zealand routes, Origin has faced numerous woes. Traffic fell unexpectedly and it was forced into expensive links with global distribution systems to regain the overseas visibility it lost when Qantas dropped the codeshare. Origin scrambled to forge seven interline deals with cruise lines and other foreign airlines to compensate for the lost Qantas feed.

Despite cutbacks, in May Origin teetered near bankruptcy until creditors agreed to a NZ$11.8 million ($7.6 million) rescue. With new owners now holding half its shares, the carrier is taking a hard look at its options. It needs to keep the domestic feed generated by new interline agreements, but also needs to cut costs and so far that has been top priority.

Feed traffic has suffered as Origin cut flights from Auckland, the key gateway for most of its interline partners. Flights to Invercargill have been suspended and it is pondering a pullback from Dunedin.

These are the two largest cities on New Zealand's south island after Christchurch. Origin has also downsized aircraft, grounding its only two 70-seater ATR 72s in favour of 19-seat Jetstream 31s. Rival Air New Zealand (ANZ) now leases one of those ATRs.

Origin seems wary of head-on competition with ANZ. The Invercargill service was suspended after ANZ added flights, and most Auckland-Wellington flights are being dropped because Origin turboprops face ANZ and Qantas Boeing 737s. Origin says it cannot compete on such routes unless it is 30% cheaper.

The carrier has been counting on an interline with Pacific Blue, the offshore arm of Australia's Virgin Blue. But Pacific Blue has slowed its New Zealand expansion. Origin Pacific is at a crossroads where it must either shrink or grow to serve its interline partners and an uncertain future with Pacific Blue.

Source: Airline Business