Branson deals, Air NZ waits

By CHRIS DANIELS

New links between US aviation giant United Airlines and Sir Richard Branson's Virgin Blue have highlighted Air New Zealand's lack of progress across the Tasman.

United, the second-largest airline in the world, yesterday announced a code-sharing deal with Virgin Blue for flying its passengers between Sydney and Brisbane.

Virgin Blue says the deal is just the first step in a programme for it to have code-sharing arrangements on all Australian routes.

Air New Zealand, United's partner in Star Alliance, needs an Australian partner to feed traffic onto its international and transtasman services, but has yet to secure a deal despite continuing talks with Virgin Blue and Qantas.

Under code-sharing arrangements, passengers travel on different airlines as if they were one. Baggage handling and transfers become easier and the airlines are able to use seats more economically.

Air New Zealand has long been talking with Virgin Blue in an attempt achieve a similar code-sharing deal.

It has also been talking with arch rival Qantas about the Australian carrier acquiring a cornerstone shareholding in its operations.

JBWere aviation analyst Peter Sigley said the Virgin Blue-United deal was unlikely to provide any new stream of passengers for Air NZ.

"What you're seeing here is that Air New Zealand's key code-share partners really can't be satisfied by Air New Zealand in terms of the ability to feed traffic into and out of Australia, which is the real market in this part of the world."

United had looked at the market and worked out which party it needed to deal with - Virgin Blue.

"One way to read it is that it's completely independent of Air NZ and doesn't have much bearing on it, or it shows that Air New Zealand is out there in the wilderness," said Sigley.

Air New Zealand relied heavily on its code-sharing arrangements with United and Singapore Airlines and would be in big trouble without them.

The inability of Air New Zealand to come to any such arrangement with Virgin Blue for code-sharing could make the present discussions with Qantas, a member of the rival Oneworld alliance, "more meaningful".

One thing Air New Zealand could not afford to do was to end up without the code-sharing deals with United and Singapore Airlines and to be competing with Virgin Blue across the Tasman and domestically.

Air New Zealand spokesman Cameron Hill said the Virgin Blue-United deal was "of little significance to us, given that they [United] fly into only two cities in Australia and have only single frequency per day whereas we have multiple frequencies into a larger number of gateways".

Air New Zealand's requirements were therefore more complex.

"We are continuing to discuss possible arrangements for both the on-carriage of our New Zealand passengers to ports beyond those we service and the feed of Australian passengers into our transtasman network with both Qantas and Virgin Blue.

"Those discussions continue."

Air New Zealand chief executive Ralph Norris said this week that talks about selling a minority stake in the carrier to rival Qantas would probably take "two or three months".

The negotiations, which were announced last week, had no timetable and would take "weeks, not days", he said.

Qantas spokesman Michael Sharp said yesterday that talks were in a early stage and had not involved the New Zealand Government.

Qantas was talking with Air NZ management about a possible partnership, which, if agreed upon, could involve the Australian carrier taking a minority stake in the NZ airline.

After weeks of rising steadily the Air New Zealand share price closed down 8c on heavy turnover yesterday, finishing at 63c.

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