Air NZ sure gets around
It’s out with Virgin, and a new code-share with Qantas the very same day
Christopher Luxon was on the big stage at the annual gathering of airline leaders this week, where he restated his credentials as an industry outsider, but pushed back against accusations of Air New Zealand “promiscuity” like a sector veteran.
Three days after the bombshell announcement of the domestic codeshare with former foe Qantas, CNN’s Richard Quest put it to Luxon this way: “My God you’re promiscuous. You have barely got rid of Virgin Australia and you’ve moved in with Qantas.” Luxon didn’t blush, said it was a “gross exaggeration” and stressed that the deal would apply to only a small number of passengers wanting streamlined access to domestic flights in the transtasman neighbours.
Look at any departure or arrival board and you’ll see Air New Zealand is in good company in sharing itself around — code-shares have been around since nearly the beginning of air travel and it’s no surprise that Air New Zealand is moving in with Qantas the day the Virgin alliance ends. October 28 is like moving day in the dairy sector, as different seasonal schedules kick in around the world.
Quest was moderating the keynote CEO Insight Debate at the International Air Transport Association (IATA) gathering in Sydney. When touching on the airlines’ moves to co-operate on biofuel and ground handling, he wondered aloud about the reasons for their plans to work together.
“Do you think we were born yesterday?” he asked before Luxon talked of “good areas of policy we can be joined up and working together.” So far, so good. That all makes sense and what is a standard code-share is good for Kiwi passengers who want access to a more extensive network in Australia than Virgin offered.
Qantas’ boss Alan Joyce is fond of saying it’s going to make travel easier from places like Kerikeri to Wagga Wagga (where on the day of the announcement, there was brief excitement about the prospect of direct flights to the Bay of Islands).
But what next? Will we get an Air New Zealantas or Qanland? Eyebrows are always raised when airlines buddy up, however shallow the deal.
Between them, the new code-share cobbers have nearly 70 per cent of the transtasman market and with Qantas offshoot Jetstar here, the two airline groups have more than 95 per cent of the domestic market. Any closer commercial alliance would give them huge market power.
So far, the Commerce Commission here says the code-share doesn’t require any inspection “based on the information available”, while its Australian counterpart rather enigmatically says it doesn’t comment on “potential investigations”.
The airlines are right in stressing that they will compete vigorously across the Tasman and on other international routes where there is overlap.
There is a real flashpoint between them across the Pacific, where Air New Zealand attracts a 777-load of passengers a day from Australia to hub out of Auckland, then on to North America.
And Air New Zealand says it will continue to compete hard in this country against Jetstar. That’s worked well so far. Air New Zealand has maintained about 80 per cent market share and an even greater proportion of revenue since Jetstar arrived on the domestic scene nearly a decade ago.
Jetstar has struggled to make money here and its regional expansion using turbo-props has been a boon for consumers, but even more of a financial burden for the airline.
When it started flying to four regional airports nearly three years ago, there was optimism about that being just the start. There hasn’t much expansion talk lately, though.
And Jetstar potentially faces an even tougher time when the codeshare encourages some transtasman passengers carried by Air New Zealand onto its domestic operation, lured by a much bigger network, higher frequency and for those who qualify, lounges.
But in a case of having your cake and eating it too, Qantas and Air New Zealand say in one breath that this will be great for streamlining travel to the regions, then say there are only a small number of travellers who connect from international flights. In this country at least, the vast majority on Jetstar are point-to-point fliers.
And Jetstar will be further insulated. It will carry the Qantas code if its flights were timed for about the same time as Air New Zealand services, providing an incentive for passengers to stay with it.
Jetstar’s new boss Gareth Evans says the airline is “110 per cent committed” to this market.
The Aussie low cost airline has been instrumental in keeping a lid on domestic airfares.
A Statistics NZ airfare index shows that although domestic fares went up 16.8 per cent during the past 12 years, that was well below the overall inflation rate of 24.2 per cent. Tellingly, for international flights — where there is genuinely intense competition to Air New Zealand — fares have fallen by 21 per cent.
Jetstar is frustrated by the lack of payoff here for its role in keeping fare rises down — travellers benefit but wave to the silver and orange plane as they head for Air New Zealand aircraft.
Joyce told journalists at a briefing on the sidelines of the IATA meeting that the best way to ensure the viability of Jetstar services was for Kiwis to use them. “Make sure you’re fully behind these, make sure you support Jetstar the whole hog.”
Regional New Zealand is getting a shot in the arm from the $1 billion-ayear provincial growth fund and a lively, competitive aviation market is essential for getting people around the country.
Any reduction in competition as a result of last week’s deal would be fought vigorously by local communities, and would be sure to fire up someone Air New Zealand has got to know well this year: the loud champion of the regions, Shane Jones.
My God you’re promiscuous. You have barely got rid of Virgin Australia and you’ve moved in with Qantas. CNN’s Richard Quest