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Qantas deal with Air NZ forces Virgin into corner

June 4, 2018 Headline News 1 Comment Email Email

A shock codeshare agreement between Qantas and Air New Zealand, announced by the two carriers on Friday and applying to domestic flights on either side of the Tasman, will ratchet up pressure on Virgin Australia, formerly an Air NZ ally but now comparatively isolated.

The codeshare deal does not apply to trans-Tasman flights nor to international services. It will apply to 115 domestic routes in New Zealand and Australia. Other potential areas of cooperation include ground handling, freight and biofuel.

Qantas says the reciprocal codeshare agreement leverages the strengths of each carrier’s domestic networks, making travel within Australia and New Zealand easier and speeding connections between flights to reduce total journey time by up to two hours.

Qantas and Air New Zealand cabin crew pose against the airlines’ tailfins

The codeshare will see Qantas add its code on up to 30 routes on Air New Zealand’s domestic network. Air New Zealand plans to add its code on up to 85 routes on Qantas’ domestic network.

Tickets for the codeshare services will be available by the end of July 2018, for travel from 28 October 2018, the carriers say.

Whether the proposal raises competitive issues remains to be seen. Statements issued by both carriers on Friday contained no mention of “pending regulatory approval” or anything like that. The agreement may not require approval, as it’s basically just a code share, not a joint venture.

Virgin has labelled it “bad news” for consumers, with a spokesperson telling the New Zealand Herald the deal would have flow-on effects for competition on the Tasman “given only the two biggest players who had more than 70% of the market will be able to codeshare at each end”. Additionally, Qantas subsidiary Jetstar is New Zealand’s second biggest domestic airline.

A Qantas statement said coordination of check-in and handling at airports “will mean shorter connection times, opening up more onward flights for customers on each carrier’s domestic networks and faster journey times overall.

“Eligible customers will have access to a combined total of 36 domestic lounges on both sides of the Tasman when flying on routes covered by the codeshare agreement.”

The new deal will squeeze Virgin Australia, formerly a close ally of Air New Zealand. Air New Zealand was once a substantial shareholder in Virgin Australia. The New Zealand airline sold off its shareholding in 2016 but the two carriers remained committed to their trans-Tasman alliance, which started in 2010 and saw them cooperate on services between New Zealand and Australia.

Perhaps not by coincidence, the Air New Zealand/Virgin Australia trans-Tasman alliance will end on 28 October 2018, the same day the new Qantas/Air New Zealand domestic codeshare relationship takes effect.

The new deal cuts straight across the carriers’ relationship with international airline groupings oneworld and Star Alliance. Air New Zealand is a Star Alliance member and Qantas is a founding member of rival oneworld.

Welcoming the closer link with Air New Zealand, Qantas chief executive Alan Joyce said on Friday the two national carriers had a lot of shared history as well as a shared goal of making travel easier.

“Our relationship with Air New Zealand goes back almost 80 years. We’ve been partners at various stages over that time and we have a lot of respect for them as a competitor.

Handshake seals the deal. Qantas chief executive Alan Joyce and Air New Zealand chief executive Christopher Luxon

“A codeshare deal on our domestic networks makes sense for customers because it leverages the strengths we each have in our home markets.”

Air New Zealand chief executive Christopher Luxon said the codeshare would see two of the world’s best airlines offer their customers a full service experience when they make domestic connections within New Zealand or Australia.

“While the two airlines will continue to compete very strongly across all markets, Air New Zealand and Qantas are known for having a commitment to innovation, customer service excellence, operational performance and safety.  We are confident that our respective customers will enjoy the reciprocal benefits on both sides of the Tasman.”

The codeshare and customer offering will exclude Trans-Tasman flights. Qantas will continue to codeshare on all connecting Jetstar New Zealand services.

Travellers should be able to earn points and status credits in each airline’s respective loyalty program on flights booked under the appropriate codeshare.

Written by Peter Needham

Currently there is "1 comment" on this Article:

  1. AgentGerko says:

    This is dreadful news for travellers!! You are giving the biggest players in each market a huge competitive advantage that can only result in higher airfares and lower service. Any regular travellers would know that codeshares do everything for the airlines and absolutely nothing for the consumer. On the occasions when things go wrong, each airline simply blames the other – “oh, but you were on a Qantas flight. oh, but you were holding an Air NZ ticket”.

    We are fast approaching a repeat of the Qantas/Ansett era where QF had a virtual monopoly on international feed-in traffic, which saw Ansett spend and lose millions trying to create an international network that could compete but never did. Virgin has at best been marginally profitable over the last few years and with mostly foreign shareholders, it wouldn’t take too many bad years for them to sell out. With QF already pushing domestic fares up regularly and reintroducing the bad old days of advance purchase airfares, Australians cannot afford to return to the days of Compass and Impulse. We need a solid alternative to Qantas/Jetstar. I don’t know if anything can be done to stop this union between NZ and QF but regulators on both sides of the pond should certainly be looking at this.

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