KEY POINTS:
From early next year a new plane will make its big presence felt flying the Tasman, a route one carrier says could see commercial "carnage" for airlines.
When Emirates starts operating its double-decker Airbus A380 out of Auckland from February 1, capacity on the route will grow by
360 seats a day as a bigger plane will also travel out of Christchurch.
Rocketing fuel prices and falling consumer spending power around the world have forced airlines to pull back from long-haul routes and capacity is down around 7 per cent in the fourth quarter of this year. But transtasman services have so far remained largely unscathed.
Royal Brunei has increased flights from three times a week to daily and Pacific Blue is putting on a new Auckland-Melbourne service later this year.
And some in the industry are picking travel within Australasia could benefit from the financial pressure to remain close to home.
Transtasman bookings make up 40 per cent of Flight Centre's business and product general manager Andrew Stark said this could rise.
"We have seen a drop off in long-haul travel and we have seen an increase in transtasman travel in direct correlation to the tight economy. It's only when times are going exceptionally well people tend to take extravagant holidays."
Ministry of Tourism figures show spending by Australians increased by 17 per cent in the year to March - up $249 million to $1.7 billion.
While Stark says passengers have it good for now, Air New Zealand warns of a potential bloodbath for airlines.
Shorthaul manager Bruce Parton says while capacity over the past 12 months was steady and demand was holding up, Air New Zealand was no longer seeing growth in the volume of passengers travelling on the Tasman route.
"Profitability on the Tasman deteriorates rapidly when the rate of capacity growth in the market exceeds the rate of passenger growth. With passenger numbers flattening out, any significant increase in the level of market capacity will cause a decline in the profit of all airlines on the route," he told the Business Herald last month.
"Put simply - the Tasman market is on the cusp of potentially turning into a bloodbath. Some carriers look like they are ramping up capacity."
There were also murmurings of some new entrants looking to take up rights to fly beyond Australia.
Beyond rights or Fifth Freedom rights refer to the right of an airline from one country to land in a second country, to then pick up passengers and fly on to a third country. Parton said the end result could be "carnage" but Air New Zealand would not be one of the casualties.
Low fares combined with new products were the key for the airline, he said.
Pacific Blue's Australian parent Virgin Blue has cut back in Australia as profitability plunges but its New Zealand operation is upbeat.
Commercial general manager Adrian Hamilton-Manns says in a tougher economic market people are very much driven to value brands and he agrees with Air New Zealand the key is high quality service with low fares.
"Many New Zealanders these days consider transtasman travel as almost a domestic flight - they'll definitely go there for a long weekend - but they don't want to spend a lot to get there." With four weeks holiday a year they were looking at two overseas breaks a year rather than just one.
Auckland Airport general manager aeronautical Tony Gollin said fares would be even more crucial.
"The cost of oil will promote shorter haul trips and in a sense Australasia has not seen the low-cost carrier boom if you look at the models in Europe. I think there's a lot of potential there."
Emirates began flying across the Tasman to Auckland and Christchurch just on five years ago on a leg which provides a bit of cream on the top of its Europe-Dubai-Australia route and avoids leaving aircraft idle and incurring costs at Australian airports.
Gollin says the A380, which will fly the Auckland-Sydney route, will inevitably create a buzz of its own.
"From the New Zealand point of view there's a fascination with the aircraft type - most people won't be able to afford the shower and spa facilities at the front but I think there will be a lot of enthusiasm."
Aboard the A380 on its first commercial flight from Dubai to New York at the weekend, Emirates veteran Keith Longstaff said the airline was committed to the transtasman route.
New Zealand fitted into an aspiration to become a true round-the-world carrier with flights from Australasia to the Americas "at some stage".
In the meantime Emirates made money, but "not a lot", from the route.
"We do OK, there's no reason to consider we made a mistake flying to New Zealand - to the contrary."
Fares for the A380 have not been finalised. Longstaff, who is Emirates' senior vice-president of commercial operation, said the airline was comfortable with its pricing position, somewhere in the middle of the pack of airlines flying the Tasman. "We won't be charging less, I can assure you. We'll be pricing it according to the market."
Flight Centre's Stark says Air New Zealand and Qantas may lose market share to Emirates with the arrival of the big plane.
"From a retail perspective we're quite happy to sit back and see this happen. I wouldn't want to be in the airline space at the moment," he said
Travellers were wising up with fares increasing as airlines used up fuel hedging - buying at a cheaper, fixed price.
"To the consumer we say take advantage of any price you see now, book in advance."
