Virgin Blue and Air New Zealand have come up with a proposed alliance that makes them friends across the Tasman and continued enemies inside New Zealand, and the Pacific island regional and broader US markets.

The main thing they have agreed to do is sell each other’s seats on any flights they operate between both countries, including where necessary on each other’s domestic networks.

But Virgin Blue’s outgoing CEO Brett Godfrey was emphatic this morning that his group’s Pacific Blue domestic flights in NZ — and its lucrative routes between NZ and nearby small Pacific states, including the Polynesian Blue operation shared with the Samoan government — would continue to compete with Air NZ flights.

He also said the Emirates A380s and 777s that fly across the Tasman with a Virgin Blue code share wouldn’t be affected and wouldn’t carry a third Air NZ code share designation.

“This is different to the earlier Qantas/Air NZ proposal that didn’t proceed” Godfrey said. “We are rationalising costs but not capacity.”

Godfrey said Virgin Blue was looking at growing its services across the Tasman rather than reducing them, but would work with Air NZ to eliminate ‘wing tip flying.’

“Where we have three jets each leaving at identical times from an Australian or New Zealand city we will spread them out, but we won’t be cutting them back,” he said.

This ‘no-step backwards’ pact made by Virgin Blue and Air New Zealand on the trans-Tasman routes means, on current schedules, they will if granted competition authority approval be selling from a combined pool of about 48% of the seats available between both countries. Godfrey said Qantas and Jetstar currently fly about 40% of the seats available across the Tasman, Air New Zealand had 30%, and Virgin Blue and its Pacific Blue subsidiary offered around 18%, with Emirates flying most of the balance.

Godfrey also revealed the alliance proposal talks began toward the end of the third quarter of last year, and that the carriers expected it could take six months to win approval by the ACCC and its New Zealand counterpart.

On the big Pacific stage, the relationship between Virgin Blue and Delta will continue independently to the long-established Star Alliance arrangements between Air New Zealand and United, which in another development is about to announce an agreed merger with Continental Airlines.

It’s clear Virgin Blue and Air NZ see the proposed alliance as ‘sorting out’ the competition they get from Qantas and Jetstar across the Tasman — the other battles within New Zealand and further across the Pacific are nowhere near over.

Peter Fray

Get your first 12 weeks of Crikey for $12.

Without subscribers, Crikey can’t do what it does. Fortunately, our support base is growing.

Every day, Crikey aims to bring new and challenging insights into politics, business, national affairs, media and society. We lift up the rocks that other news media largely ignore. Without your support, more of those rocks – and the secrets beneath them — will remain lodged in the dirt.

Join today and get your first 12 weeks of Crikey for just $12.


Peter Fray
Editor-in-chief of Crikey