The book on trans-Tasman co-operation has closed following the sale by Qantas Airways of its 4.2% stake in Air New Zealand.

Qantas bought the stake in 2002 when the two airlines were planning a strategic alliance. But competition regulators rejected both their initial and scaled-down proposals, leaving Qantas with no reason to keep the shares. It has sold them at a NZ$21 million ($16 million) profit, mostly to New Zealand and Australian investors.

The two airlines have now set separate and competing courses. Qantas is likely to put more pressure on ANZ within New Zealand, and ANZ is adopting new strategies for trans-Tasman routes where both compete.

Within New Zealand, Qantas has rejected an offer to sell its domestic operation, JetConnect, to a proposed start-up called KiwiJet. Qantas has never made money on New Zealand domestic operations, but it wants to stay in the market because it feeds traffic to and from other Qantas flights. As Qantas executive general manager John Borghetti explains in rejecting KiwiJet's offer: "Jetconnect is enabling us to maintain our competitiveness."

Insiders predict it is only a matter of time before Qantas beefs up JetConnect or unleashes low-cost Jetstar on New Zealand domestic routes. According to some, it might have done so sooner but for its preoccupation with the recent failed attempt by KiwiJet to take over JetConnect.

After its Tasman alliance plans with Qantas were scuttled, ANZ opted to reassess its own Tasman services. That review will be complete by the end of this year, but has already prompted two changes. First, ANZ has cut capacity between New Zealand and Australia by between 11% to 28%, depending on the route, and thereby restored profits routes across the Tasman Sea.

Now, it is investing NZ$50 million in personal in-flight entertainment systems in all Airbus 320s and Boeing 767s to improve the onboard product. ANZ faces a strategic choice on whether to follow the low-cost trend Qantas has introduced on the Tasman by turning routes over to Jetstar, or to differentiate itself with more in-flight services.

Source: Airline Business