The New Year passed quietly with no mention of the earlier boast made by Pacific Blue, Virgin Blue's international arm, that it would be flying New Zealand's domestic skies by the end of the year.

It never happened and for at least three reasons. The first, and perhaps most basic reason, is that competing against the Express Class on Air New Zealand (ANZ) is a daunting prospect for any domestic start-up. Another is that adequate access to Auckland International's domestic terminal remains elusive for Pacific Blue, and the proposed development of a second Auckland airport at Whenuapai has hit snags. Finally, Virgin Blue seems to have found better uses for its aircraft, either in Australia or most recently within the Pacific islands.

For 18 months Pacific Blue has been in discussions with Auckland airport about access to its domestic terminal, where ANZ is the largest tenant. The airport says these talks have been "constructive", but Pacific Blue complains that it is being pushed into building its own terminal. Out of frustration, it has lobbied New Zealand's government to press ahead with a proposal to convert the air force base at Whenuapai on the north side of Auckland into a commercial airport.

That proposal was set back in December when the government decided to keep the airbase for up to 10 more years. Proponents of a commercial airport, including airport operator Infratil, which hoped to manage Whenuapai, accuse public officials of siding with Auckland International and ANZ, which both oppose Whenuapai's conversion. Infratil and local city councils hope to convince the air force to lease Whenuapai facilities for commercial flights, but the government's decision has not helped Pacific Blue.

Finally, Pacific Blue keeps finding new route opportunities for its Boeing 737s in the Pacific islands. It recently obtained authority to boost Australia-Fiji frequencies from six a week to double daily. It expects to add most of these flights in the second quarter of this year.

Meanwhile, Virgin Blue has also won the tender to form a joint venture to operate Samoa's Polynesian Airlines and take an equity stake in it of up to 49%. As a result, New Zealand plans appear to be on hold.

DAVID KNIBB SEATTLE

Source: Airline Business