An alliance between Virgin Blue and Air New Zealand could deliver benefits for passengers, writes Clive Dorman.
The proposed trans-Tasman alliance between Virgin Blue and Air New Zealand isn't rocket science, according to the retiring chief executive and founder of Virgin Blue, Brett Godfrey.
From Virgin Blue's end of the deal, it's first about going back to basics in the low-cost airline rule book to reduce costs and to make more cheap fares available more regularly.
Advertisement: Story continues belowBut, he says, there will be other benefits, such as new direct services between regional destinations in Australia and New Zealand and a reduction in airfares on existing regional connections by removing internal bureaucracy in the way fares are currently calculated between two separate carriers.
''Can we go lower than $100 (one way)? Not on a sustainable basis," Godfrey says. ''I can't make a promise that fares are going to go lower than they are today. There'll always be $99 fares; the question is how many seats will be offered at those sorts of levels."
Godfrey says Virgin Blue will concentrate on more flights from its Brisbane hub on behalf of the two carriers, while Air New Zealand will operate more of the services from Auckland, putting wide-body jets on the more important destinations such as Sydney and Melbourne.
''That means we're going to get greater utilisation out of our fleet and our crews and as a consequence, that'll result in lower costs,'' Godfrey says.
But that doesn't factor in the "game-changer" that Godfrey believes will be introduced to the market when Australia and New Zealand finally agree on reform of the Tasman air space, which will enable flights between the two countries to operate as domestic services.
According to the chief executive of Jetstar, Bruce Buchanan, that will lower one-way fares by $50-$80 because passengers won't be paying the $47 international government departure tax and airlines won't be charged the higher airport fees that apply for international terminals.
The first domestic-to-domestic trans-Tasman services were due to fly last December and were then rescheduled for this year's first quarter, which has come and gone. According to aviation industry sources, Australian government bureaucrats and politicians are ''dragging the chain'' on the reforms, while their New Zealand counterparts are much keener to get them started.
Godfrey says the current system, whereby passengers between the two countries are forced to fly internationally on what are essentially domestic routes, is ''something that all airlines are keen to have resolved at the earliest opportunity."
He says Virgin Blue is considering operating four ''city pairs'' linking regional centres, on both sides of the Tasman, that no one flies to now. He says that, for someone wanting to get from Albury to Nelson, for example, tickets will be cheaper when true through-fares are available.
Godfrey says he won't try to predict the outcome of the investigation of the deal by the Australian Competition and Consumer Commission and the New Zealand Commerce Commission. But he insists it's vastly different from the failed Qantas-Air New Zealand alliance blocked by regulators in 2006. ''Last time was very much about rationalising capacity,'' he says.
''This is more about rationalising fares. If anything we see the opportunity to increase frequencies.''
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