Virgin's challenge promises airfares war on trantasman route

SYDNEY - A transtasman airfare war looks inevitable after Virgin Blue's threat to slash fares by more than 40 per cent.

Air New Zealand is talking of cost cuts of more than 20 per cent when its Tasman Express service starts this year, and Emirates Airlines cut fares on some of its introductory flights to Auckland by 20 per cent.

Air New Zealand said recently it was making a small profit on the Tasman but the entry of other airlines, such as Emirates and Virgin Blue, would cost existing carriers market share in the short term.

Virgin Blue chief executive Brett Godfrey said yesterday his airline could slash fares further and still turn a tidy profit.

"I don't believe the route needs to be unprofitable," he said.

"It's one of Australia's largest routes and it's New Zealand's largest."

Virgin Blue reapplied for landing slots in New Zealand last week.

Godfrey said he supported the proposed A$550 million ($616 million) alliance between Qantas and Air New Zealand if Qantas moved into Air New Zealand's terminals, freeing terminals for Virgin.

The Sydney Morning Herald said the Virgin transtasman service was likely to be called Pacific Blue.

Virgin is not allowed to use the Virgin Blue name outside Australia.

Godfrey criticised Qantas' three-year $A1 billion cost-cutting programme when opening Virgin's Blue Room lounge in Sydney.

"They give away food, they have business class, they are members of a very expensive global alliance," he said.

Chief executive Ralph Norris has promised Air NZ would be competitive when it revamped its Tasman service.

- NZPA