Virgin Blue likely traveller link candidate

By DANIEL RIORDAN aviation writer

Air New Zealand and Virgin Blue are planning discussions about passenger alliances after the final collapse of Ansett.

Virgin Blue met Singapore Airlines last week to talk about possible links, and plans to talk soon to Air New Zealand and other members of the Star Alliance, Virgin Blue chief executive Brett Godfrey said.

Yesterday, Air NZ spokesman David Beatson said an agreement with Virgin Blue was an obvious solution to Air NZ's lack of an Australian presence.

"Our first preference was to form an alliance with Tesna Ansett but that's obviously no longer viable. So we have to explore our alternatives."

Ansett collapsed for the second time after a five-month battle to save the airline failed.

The Tesna syndicate walked away from the A$3 billion ($3.7 billion) rescue plan when it failed to secure critical deals on airport access. Ansett's final flight landed yesterday morning.

The failure of its former subsidiary leaves Air NZ without an Australian link to feed passengers onto its transtasman flights, and also poses problems flying the other way, where Air NZ passengers will be delivered to Qantas or Virgin Blue for travel within Australia.

Air New Zealand's major reason for buying Ansett was to ensure feeder traffic, although Air NZ has never disclosed how many extra passengers that brought it.

During Ansett's administration period, Air NZ had an interline agreement with Ansett Mark II, put in place soon after the slimmed-down airline started flying under the control of its administrators.

The interline agreement allowed bookings on Ansett services to be made through Air NZ's travel centres, call centres or directly online linking to the Ansett Mark II website via the Air NZ website.

Ansett's demise leaves Star Alliance without an Australian domestic carrier.

Air NZ and its Star partners - including United, Thai Airways and Singapore Airlines - were required to feed its passengers onto Ansett.

Air NZ may have lost its partner in Australia, but it has had success on another front across the Tasman with the sale of its Jetset Retail travel agency to Australian travel group Travelworld, a subsidiary of the Australian Stock Exchange-listed Heartlink.

Air NZ last December agreed to sell its Jetset Business Travel operation to SYNERGI Travel Australia.

Air NZ has signed a long-term agreement to become a preferred trading partner of Jetset Retail, which Beatson said would ensure it retained a high profile in the Australian travel market.

Jetset has 431 agencies and Heartlink nearly 750 agencies in Australia. The transaction will be settled in mid-April at a purchase price of between A$6 and A$7 million ($7.4 million and $8.6 million).

Meanwhile, Beatson said Air NZ continued to investigate whether Qantas was guilty of predatory pricing in New Zealand and on transtasman routes.

Qantas is preparing to lift its presence in New Zealand, adding more planes.

Chief executive Geoff Dixon was reported last month as having told staff he planned to attack Air NZ and "put it out of business".

Beatson said it was still too early to say if the national carrier had grounds to take its complaints further, "but we're certainly looking into it very, very hard".

"We're looking at their general offer of extra low fares between Auckland and Wellington, which was an introductory offer which seems to have gone on an awfully long time, and we're looking at some of the corporate bidding they've been doing to try and win business travel accounts."

Proving predatory pricing transtasman would be more difficult, said Beatson.

"There are more players in the market and there are a lot worse things going on than what Qantas is doing."

He said that in some cases carriers could offer flights at extremely marginal cost.

"The aircraft may be on route through New Zealand through Australia back to somewhere else and they can make up the money on other legs of the journey."

In such cases it was difficult to demonstrate the pricing offered in one sector was predatory in terms of operating costs.

A Qantas spokesman said yesterday that it would be difficult to prove predatory pricing against a player with only 20 per cent of the New Zealand market.

Commentators say Qantas would be keen to keep Air NZ as unprofitable as possible to help the Australians eventually buy into the airline at as low a price as possible.

Qantas' executive general manager of sales and marketing, John Borghetti, on Friday denied the charges, telling The Australian that Qantas was too busy minding its own business and making sure it was profitable "to drive anyone out of business".

He declined to say whether the airline was losing money in New Zealand.

Qantas is also at loggerheads with the Australian Competition and Consumer Commission over the airline's dominance in its home market.

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