KEY POINTS:
Air New Zealand has little to fear from Sir Richard Branson's plans to set up a domestic airline because of the national carrier's strong grip on the lucrative corporate travel market, analysts say.
Branson, in this country to celebrate the three-year anniversary of low-cost carrier Pacific Blue flying
the Tasman route, said yesterday that a domestic service was on the cards.
The only timeframe he would give in the Newstalk ZB interview was "before my next visit [to New Zealand]". His last visit was three years ago.
Deutsche Bank's Sydney-based transport analyst, Jason Bloom, said Branson's Virgin Group Australian subsidiary, Virgin Blue, was struggling to crack the Australian business travel market and was unlikely to find New Zealand any easier.
This country's domestic market was tough to crack, Bloom said, pointing out the failure of Ansett New Zealand and Qantas's recent announcement it would stop flying between Wellington and Christchurch.
Business travellers were unlikely to travel on Virgin Blue when they still had to travel on Air New Zealand for long-haul flights, Bloom said.
Also, Virgin would find it difficult to compete in the leisure market because Air New Zealand could make cheap seats available while still offering the flexible high-yield fares to the business customer, Bloom said.
Nonetheless, shares in Air New Zealand fell 3c to $2.02 after Branson's comments.
One analyst, who did not want to be named, said the comments suggested that Virgin wanted to sort out its international routes before doing anything in New Zealand. "In some ways maturing the international network will allow easier entry into the New Zealand domestic market because it will allow passengers on to the international network," he said.
"Reading between the lines, it sounds like the next 12 months Virgin will be filling out its international destinations, followed by some initiative on the domestic front."
But if Qantas continued to reduce routes as quickly as it had been, Virgin might fast-track its New Zealand plans, he said.
How Branson fared would depend on his commitment to the market, Deutsche Bank's Bloom said.
Branson had the brand and the cost base to offer a competitive domestic product.
"To really get in [to the domestic market] you need frequency ... [which is] where Qantas has suffered because it didn't offer enough flights to match Air New Zealand's," Bloom said.
Qantas said last month that competition and declining passenger numbers were forcing it to stop flying between Wellington and Christchurch.
Branson's low-cost airline experience has mainly been in Australia, where he proved he could move quickly. Virgin Blue entered that market, dominated by Qantas and Ansett, in 2000. Bloom estimated that it now had about 30 per cent of the market. Ansett collapsed in 2001.
