Virgin Blue launch ruffles few feathers

Virgin Blue will launch its service on the highly competitive Tasman in February, with fares almost half the lowest currently on offer.

Virgin Blue said today it will begin daily 180-seat flights under the Pacific Blue Airlines banner between Christchurch and Brisbane on February 1, using Christchurch as its base.

That is dependent on whether it receives an operating certificate from Civil Aviation, which it applied for today and takes 90 days to process.

Chief executive Brett Godfrey said the airline's introductory price of $99, plus taxes and surcharges, will be replaced in March by day fares of $189, excluding taxes and charges, and flexible "walk-up" fares of $349, one-way.

Air NZ introduced a $189 one-way fare for its trans-Tasman Express Class earlier this year, which was matched yesterday by Qantas' announcement of lower daily fares, and now Virgin Blue.

No-frills Pacific Blue plans to expand services between New Zealand and other key ports in Australia, and offer a domestic service some time next year.

Mr Godfrey said Pacific Blue planned to hire about 200 staff during its start-up phase.

"We feel part of your country -- this is not Virgin Blue that's coming across the ditch, it's in fact your newest and freshest airline and it will be every bit as similar as Virgin Blue in the Australian market," he told reporters in Christchurch.

The low cost flier was not allowed to use the Virgin Blue brand outside Australia.

Christchurch Airport chief executive George Bellew said the airline's arrival would open up a new travel market and inject millions of dollars into the region.

"Not only will this new airline improve options for South Island travellers, but it will boost employment, trade and tourism opportunities -- worth over $140 million to the South Island."

Mr Bellew said Virgin Blue had been offered a $1 million package if it met targets of increasing visitors to the region.

"We've incentivised them -- but only subject to them performing -- by way of a marketing package.

"As far as landing charges and other issues like that, they pay the same money as any of our other airline customers.

"They've got to grow the overall number of visitors on those sectors that they're operating on."

Of 140,000 expected extra tourists, 100,000 would be sourced domestically.

Virgin Blue, which focused on leisure tourism, chose Christchurch as a gateway to some of New Zealand's most popular tourist destinations.

Mr Bellew said there was more capacity on routes to Christchurch, as opposed to the highly competitive Auckland market, which had most recently seen the arrival of Emirates.

John Sheridan, chief executive of Wellington International Airport, which had also been in the running as Virgin's launch pad, said the company was disappointed but had tried hard to attract the discount flier.

However, Mr Sheridan said he was confident Wellington would attract Pacific Blue services as it expanded.

Air NZ said today it was not surprised at Virgin's announcement. Chief operating officer Andrew Miller said it was too early to decide whether Air NZ would meet Virgin's introductory fare.

Air NZ was well-placed to withstand competition for the next two to three years, but still needed the alliance with Qantas to strengthen its business in the longer term, Mr Miller said.

Air NZ has said it expected its capacity share on the Tasman to drop below 30 per cent as a result of new entrants and increased competition, totalling 13 airlines.

Qantas said today Virgin's launch was "entirely expected".

Qantas has lived up to expectations it would press on in its bid for trans-Tasman domination, now the Australian competition watchdog has turned down its proposed $550 million alliance with Air NZ.

In addition to yesterday's cheap fares, Qantas has increased its capacity in and to New Zealand during the last month and said it would cut costs by reducing in-flight services in New Zealand.

The fastest-growing airline down under, Virgin Blue started service in Australia on August 31, 2000, with a fleet of Boeing 737-400s.

Air NZ shares lost 2c to 53c.

Table Of Virgin Blue Fares

Virgin Blue's introductory one-way fares ex-Christchurch are available between September 17 and 28, for travel between February 1 and March 27 2004.

* Launch special: $NZ99, if booked on the Internet, or $141.05 inclusive of taxes and surcharges.

* Everyday fare: $NZ189

* Fully flexible fare: $NZ349

* Fares cost $NZ10 more if booked by phone

* $99 fares are exclusive of government departure tax ($25), airport passenger service charge ($10.20), and a security levy of $6.85.

Pacific Blue's fares ex-Brisbane, inclusive of taxes and charges, are:

* Launch special: $A149 ($NZ170.83)

* Everyday fare: $A219

* Fully flexible fare: $A369

Qantas' new one-way trans-Tasman fares announced yesterday, ex-Auckland, are available from September 19, for travel beginning October.

* $NZ189 to Sydney, excluding taxes and surcharges
Taxes on the Qantas fare ex New Zealand are $33.20, along with departure tax of $25.

Qantas' new fare to Auckland ex-Sydney:

* $A179 ($NZ205.22) one way, excluding charges and taxes of $A64, or a total of $A243

* $A451 return

- NZPA