The airlines have today announced a co-share deal to streamline baggage.
Air New Zealand and Qantas emphasise they will continue to compete fiercely in most areas in spite of a codeshare on domestic routes on each side of the Tasman from later this year.
And Qantas says it remains ''fully committed'' to its low-cost offshoot, Jetstar, in this country even though more of its passengers will have an incentive to fly with Air New Zealand in this country.
Jetstar has been flying domestically here for nearly a decade and has been instrumental in pushing fares down. It has struggled to make money here but Qantas chief executive Alan Joyce said there was not going to be any change in its backing of the budget airline.
''We're very committed to Jetstar operations in domestic New Zealand. We are still coding with Jetstar in New Zealand but obviously Air New Zealand has a lot more of a network, routes that Jetstar doesn't cover and a lot more frequency,'' he told the Herald.
The codeshare has been welcomed by the travel industry for its promise to remove some travel ''pain points'', and comes as Air New Zealand prepares to part with Virgin Australia at the end of October.
But Virgin has labelled it ''bad news'' for consumers.
''With the two major players in the New Zealand domestic market in partnership together, there's no real competition in New Zealand and it is the consumer that will lose out,'' a Virgin Group spokesperson said.
This would have have flow on effects for competition on the Tasman, given only the two biggest players who had more than 70 per cent of the market will be able to codeshare at each end.
"Virgin Australia will continue to compete strongly on the Tasman and we look forward to sharing more on our plans for that important market soon."'
Under the code share arrangement Qantas will add its code on up to 30 routes on Air New Zealand's domestic network, while Air New Zealand intends to add its code on up to 85 routes on Qantas' domestic network.
Qantas chief executive Alan Joyce and Air NZ chief executive Christopher Luxon flanked by crew at the announcement of a codeshare deal. Photo / Supplied
The airlines say co-ordination 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.
Sean Berenson, Flight Centre NZ general manager product, said concerns about the impact on Jetstar were ''valid'' and one analyst, who did not want to be named, said there were clear signals that Qantas strongly prioritised its domestic operation ahead of Jetstar here.
Overall Berenson said it was great news for travellers.
''These changes are exciting but may be confusing for some in the initial stages, particularly the Jetstar/Qantas alliance. We encourage those travelling transtasman on either airlines to speak with their travel expert to help wade through the changes and find the best options for their travel needs.''
Air New Zealand chief executive Christopher Luxon said work on the codeshare started when his airline pulled the pin on the Virgin alliance early in April.
''We knew that we needed to find a really good partner in Australia for domestic traffic and as a result we found we could move with great speed and great chemistry with Qantas,'' he said.
Joyce said the deal was done in record time - just six weeks.
But like Luxon, he insists the fierce competion in other parts of their businesses would continue.
''There's not going to be any change- we're still going to be fierce competitor's in the New Zealand domestic space, on the Tasman on the Pacific. None of that is changed.''
Luxon said the airlines would operate as ''frenemies'', co-operating in some areas but retaining the cut-throat rivalry in others.
''Over time'', the airlines could explore areas of mutual interest, including research into biofuels, freight and ground-handling opportunities.
Tickets for the codeshare services will be available by the end of July for travel from October 28, when the Virgin Australia deal ends.
While the deal is a sign of a warming relationship between Air NZ and Qantas, it is short of the soured Air NZ-Virgin alliance which involved co-ordinating flights and ticket prices.
Even deeper commercial arrangements between airlines can involve revenue sharing.
Unlike those sorts of deals, the codeshare announced in Sydney today will not need the regulators' approval.
Good chemistry at the top has helped push the deal through. Air New Zealand chief executive Luxon and his Qantas counterpart Joyce have traded barbs in the past but increasingly they've been light-hearted around transtasman sporting contests.
And the airlines have grown to have the same look about them. Air New Zealand's transformation was more sudden, initially triggered by its near collapse in 2001, but Qantas has also slimmed down and become more customer-focused.
At a senior executive level there's a mutual respect and the chief executives said today that they ''spoke the same language''.
This is the closest the two airlines have become since 2002, when they attempted to enter into a wide-ranging strategic alliance.
That would have involved Qantas paying $550 million for a 22.5 per cent cornerstone shareholding in Air New Zealand, as both battled in a tough environment immediately after the 9/11 terror attacks.
However, the deal collapsed after regulators on both sides of the Tasman rejected it.
