Pacific Blue to spark New Zealand airfare war

A report in The Press in NZ says that yesterday’s announcement by Pacific Blue to commence domestic operations in New Zealand will create price war, with the low cost carrier taking on Air New Zealand and Qantas with a new domestic air service and the promise of cheaper fares.

Christchurch business and travel leaders have welcomed the promise of “more affordable” fares by Pacific Blue, which is keeping launch details under wraps until tomorrow.

Virgin’s subsidiary, low-cost carrier Christchurch based Pacific Blue, has been flying trans-Tasman since 2004 and at its third anniversary in January, Branson said it had captured 10 per cent of that market and the only thing delaying a domestic service was a lack of planes.

An aggressive competitor will shake up Air New Zealand and Qantas domestic operations at Christchurch International Airport and elsewhere, with Virgin Blue spokeswoman Amanda Bolger said yesterday cheap fares would be available.

She would not say whether Christchurch would be a hub for the domestic operation and get extra jobs, but Virgin has previously said the 20 Embraer aircraft it has on order would be suitable on New Zealand provincial routes and the airline has tried to downplay talk in Christchurch that it is busy training hostesses to staff new flight schedules.

Virgin Blue chief executive Brett Godfrey and Pacific Blue’s New Zealand chief executive, John Bartlett, will announce details at 10am tomorrow. Bolger added, “I think the fact we’re coming into the market would indicate that, yes, there will be more affordable fares in the same way that Virgin Blue’s done that in Australia”.

Travel and business leaders say they expect fares to fall as the airline seeks to be competitive against its rivals.

House of Travel retail director Brent Thomas said the airline needed a business plan to ensure fares and seat capacity were appropriately priced and sustainable.

“It’s great to have competition – that’s good for the consumer and ultimately that’s the best thing – but what we do need is something that is long-term,” he said.

Tourism in New Zealand would be boosted by Virgin’s move to introduce a “no-frills” network, Flight Centre general manager Rick Hamilton said.

Canterbury Employers’ Chamber of Commerce chief executive Peter Townsend said Cantabrians and New Zealanders “absolutely” needed more domestic airline competition.

There had been more flexible pricing and seating arrangements as people made last-minute choices to travel, but on 20 or more recent flights he had taken, there had not been any spare seats.

He said Qantas had withdrawn some services, and the demise of Nelson-based Origin Pacific, servicing routes such as Christchurch to Tauranga, had been hard for Kiwis.

“We need to ensure that we have as much competition as can be sustained on our domestic routes. I hope it’s not just an issue of cherrypicking (the best routes) because that can be self-defeating,” Townsend said.

Virgin Blue is Australia’s second-largest airline behind Qantas and is majority-owned by Toll Holdings, with Branson holding about 26%. Toll also runs inter-island ferries and rail operations in New Zealand.

Thomas said supporting Virgin’s move was that domestic travel demand was increasing, with House of Travel’s revenues in the past 12 months up 20% over the previous year.

“New Zealanders are – (apart from the) turmoil in the markets in the last few weeks – feeling pretty comfortable,” he said.  “The international forecasts are for travel around the world to just continue to grow 5% to 10% per annum for the next 10 years.”

Qantas and budget subsidiary Jetstar, which has signalled it wants to start New Zealand operations, had been hampered in New Zealand by aircraft “availability issues”, Thomas said.

Air New Zealand short-haul services spokesman Norm Thompson said he was not surprised by Virgin’s announcement. “We have heard murmurings of competitors bringing forward their launch plans,” he said.

Report by The Mole