Pacific Blue likely to operate in NZ
It is reported www.stuff.co.nz in New Zealand that Pacific Blue is likely to consider flying New Zealand domestic services after the demise of a code-share between Air New Zealand and Qantas.
A spokeswoman said domestic services were “not on the short-term radar”, “But we always keep options and opportunities open for the future”, with the airline making no secret of its plans to compete domestically in the lead up to launching its trans-Tasman services in 2004.
Domestic service plans were put on hold to await the outcome of attempts by Air New Zealand and Qantas to merge their trans-Tasman businesses and at the time there was also a lack of space at Auckland International Airport’s domestic terminal.
Both those issues have been largely resolved and Air New Zealand and Qantas have abandoned their plans, so the demise of Origin Pacific has freed up at least some space at Auckland airport, with airport CEO Don Huse saying that the collapse of Origin Pacific had freed up facilities for Pacific Blue, but it would depend on how many flights.
Forsyth Barr Head of Research Rob Mercer said Air New Zealand’s profits were being supported by its domestic business, adding, “From time to time people are going to compete for some low-hanging fruit in the domestic market.”
It would make sense for Virgin to link Auckland, Wellington and Auckland to support its trans-Tasman business, however, if Air New Zealand’s margins were excessive, Qantas could have been expected to have increased its existing limited services.
Historically, the domestic market in New Zealand had not supported three competitors, but an industry insider said Virgin Blue was at risk of being caught in a pincer movement between Qantas and its budget offshoot Jetstar, which flies domestic Australian and trans-Tasman to Christchurch. Jetstar would also launch long-haul international services this week.
Virgin Blue’s logical response to that was to further expand beyond its established position in Australia.
Air New Zealand’s decision to move bookings for domestic flights on to the Internet and away from loyal travel agents, to lower costs and improve profits, had made it easier for Pacific Blue to move in and Virgin Blue’s purchase of a fleet of 80- to 114-seat Embraer jets could provide the opportunity to shake up the domestic market and return competition to some regional airports.
The Embraers, smaller than Air New Zealand 136-seat Boeing 737-300s, could bring jet services to the regions.
In Australia, Virgin Blue turned conventional wisdom on its head by starting jet services to towns which had never had them. While such services may not be individually profitable, and could even require local authorities to underwrite losses, there was a quick gain in goodwill.
“Those are the sorts of things that (Virgin chief executive) Brett Godfrey licks his chops at,” an observer said.
Report by The Mole
John Alwyn-Jones
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