KEY POINTS:
Budget airline Virgin Blue roared into the domestic market yesterday with an offer of 70,000 rock-bottom fares on flights between New Zealand's three main population centres.
Almost half of its $39 opening fares for flights from November 15 between Auckland, Christchurch and Wellington by its Pacific Blue subsidiary were snapped up within hours.
Virgin Blue chief executive Brett Godfrey, over from Australia for yesterday's announcement, said the fares represented "about 20 days of flying for us non-stop" and expressed astonishment that about 10,000 were sold in the first hour.
"It almost caused our website to melt down."
By last night, more than 30,000 fares had been sold.
Air New Zealand and Qantas were quick to greet the new competition by cutting their own bottom-end prices on main-trunk routes. Although not matching the $39 special, they dropped their "lead-in year-round" fares by $20 - to between $59 and $79 - in line with those flagged by Pacific Blue in its longer-term marketing strategy.
Air NZ said higher-priced fares able to be booked at shorter notice on the new carrier appeared uncompetitive, and contrasted the size of its domestic fleet of 14 Boeing 737s with Pacific Blue's announcement that it would service 11 daily flights with just two 737s. But Mr Godfrey promised that half of all domestic seats sold in the new operation's first six months would cost $99 or less.
His two Boeing 737-800s would be newer and carry more passengers than those of Air NZ and Qantas, and a third aircraft would be added soon to the Christchurch-based operation, for other routes to be disclosed between now and November.
House of Travel retail director Brent Thomas said that although he would have liked yesterday's announcement to extend to regional New Zealand, his agency was "nothing but supportive" of Pacific Blue's entry.
Any new operation had to be started in a way that would ensure long-term sustainability.
In considering whether there would be enough demand for three domestic carriers in such a small country, he said it was important to note that more than two million people a year visited New Zealand.
Mr Thomas was also confident Pacific Blue would expand the local market by encouraging more people to fly and was pleased that it had decided to operate between Wellington and Christchurch - a route abandoned in March by Qantas.
Auckland aviation commentator Peter Clark was less impressed, questioning the contribution to New Zealand of an operation confined initially to taking "cream" off main trunk routes with minimal investment in aircraft.
Mr Godfrey mentioned Queenstown, Rotorua, Wanaka and Palmerston North as possible contenders for flights to be announced before November, but did not want to disclose more details just yet. He said Virgin would be "more than happy" to extend its network to regional centres "if we can make this work and if the New Zealand public support it".
"We want to walk before we run - at the end of the day, if Air NZ matches us and nobody flies on us we can't make that commitment - but if we find we are supported, we will support the country back."
Pacific Blue is using four aircraft to fly between New Zealand, Australia and various Pacific nations, and hopes to double its 300-strong workforce in New Zealand within two or three years.
Mr Godfrey acknowledged that the airline might run at a loss as it found its feet in New Zealand, but was bullish about its future.
"We've done this before - Qantas was the big gorilla; not just Qantas but Ansett seven years ago did their darnedest to beat us up and we went very close to the wall." But he said Virgin Blue now had more than $700 million in the bank.
"That's bloody helpful in terms of a war-chest. We've got 139 days worth of flying you can do for free and not run into the red," he said.
Air NZ short-haul general manager Norm Thompson said his airline would not be beaten on price and was surprised "how expensive" Pacific Blue planned to make domestic air travel for customers unable to book in time for the cheapest deals. Qantas regional manager Grant Lilley also vowed to remain competitive.
