Why a Virgin-AirNZ tie-up may be good for Qantas
BRISBANE – News that Virgin Blue and Air New Zealand are in “commercial co-operation talks†is attracting plenty of comment among analysts today.
Ben Sandilands, writing in Plane Talking says an alliance would be very potent, “given that Virgin Blue is now, by a whisker, the largest jet airline within Australia, and Air NZ is the dominant carrier within New Zealand, and that the gap between them is massively over servicedâ€.
“But they have much to dislike about each other too,†Sandilands says.
“Virgin Blue’s NZ based Pacific Blue operation, and its joint venture with Samoa in Polynesian Blue, have been very successful incursions into the regional SW Pacific market that was once all but completely owned by Air NZ.”
Sandilands goes on to say, “Those issues aside, an effective route sharing and network connecting deal between Virgin Blue and Air NZ would make matters awkward for Qantas and Jetstar.
“It is not hard to contemplate a John Borghetti-led Virgin Blue making sure than any such alliance saw it jointly expand into the business and fuller service market between both countries while leaving Qantas to rely on the Jetstar product, which is forever vulnerable to expectations of very low prices and price attacks from brands with higher consumer profiles.â€
Stephen Bartholomeusz, writing in Business Spectator says Qantas twice tried and failed to get what was initially an alliance and subsequently a code-sharing deal past competition regulators.
“Now it’s Virgin Blue’s turn to try to do a deal.â€
Bartholomeusz argues that Qantas and Jetstar probably wouldn’t be dismayed by a Virgin Blue/Air NZ tie-up.
“While it would strengthen a competitor it would also, like the V Australia/Delta deal, probably help reduce some of the excess capacity on the routes and produce more rational/profitable competition during a period where the entire industry is still suffering from the devastating flow-on effects of the financial crisis.
“The industry needs rationalisation and reduced capacity.
“If Qantas isn’t allowed to lead that process in this region then it is probably preferable from its perspective that someone else is allowed to do it, even if it does strengthen a competitor in the process,†Bartholomeusz wraps up.
Ian Jarrett
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