Air NZ and Qantas in seat-share deal

Air New Zealand is pinning its hopes on a new seat-sharing agreement with Qantas to restore profitability to its transtasman operations.

The two airlines yesterday unveiled a codeshare agreement which will allow Air New Zealand to take two planes off the route - something that could equate to cost savings of more than $40 million a year.

The airline will not reveal details of the cost savings because of commercial sensitivity.

The arrangement means travellers booked on Air New Zealand flights could soon find themselves winging their way across the Tasman on a Qantas plane and vice versa.

The deal was positively received. Consumers' Institute chief executive David Russell said passengers could benefit from better-timed flights.

Air New Zealand chief executive Rob Fyfe said that with eight airlines flying the route, the Tasman was one of the most competitive airline environments in the world.

Faced with spiralling fuel prices, the route was now unprofitable. That left the airline with two options, he said. Either it cut costs or it raised revenue - which would most likely mean charging more.

This agreement would offer significant benefits to the airline - which is 82 per cent owned by the New Zealand Government - and travellers, Mr Fyfe said.

Air New Zealand customers would now have a better range of travel times and more opportunity to earn and redeem airpoints.

At present about 6500 empty seats a day are flying back and forth across the Tasman, Mr Fyfe said.

On top of that the annualised fuel bill had risen by $35 million in the past month alone.

Air New Zealand says it will save 100,000 barrels of aviation fuel each year if the codeshare deal goes ahead.

At the present price of US$81 ($131) a barrel the fuel savings alone would be more than $13 million.

Yesterday's codesharing deal was in contrast with a 2003 plan involving Qantas and Air NZ, which included domestic routes and was rejected by the Commerce Commission.

Mr Russell said although he would be watching the airlines closely, there was still plenty of competitive incentive for the airlines to book passengers through their own service - even if they didn't end up flying with them.

There would be fewer daily flights across the Tasman but the rationalisation should mean that those flights were more evenly spaced, which would be convenient for travellers.

At present Qantas and Air New Zealand planes tend to leave airports at roughly the same times.

The most noticeable downside for many travellers would be that planes were closer to being full and there would be fewer chances of spreading out on spare seats, Mr Russell said.

Even outspoken critics of the 2003 proposal - such as Tim Brown, a director of airport investment company Infratil - said he was not specifically opposed to a codesharing agreement and wanted to see a strong Air New Zealand.

But he did raise concerns about the deal avoiding Commerce Commission scrutiny. That was a loophole the Government should not allow.

Because there is no equity investment by either airline in the other, the deal does not require commission approval. Instead it must be approved by the Minister of Transport.

"The last deal was bad for Air New Zealand and bad for New Zealand," Mr Brown said.

"It was only through proper scrutiny by the regulatory body that it was rejected."

Another industry expert, who did not want to be named, said he believed the agreement had the potential to result in higher ticket prices in the long term.

"You might have competitors like Emirates but, realistically, who flies with them, because the schedules are very limited?"

A spokeswoman for the Ministry of Transport said there was a clear set of guidelines for the application which would weigh up the interests of travellers as well as the national interests of having a strong airline.

Mr Fyfe said he was optimistic that the agreement could be put into action within six months.

Passengers would be told in advance which airline they would be travelling on, so loyal Air New Zealand customers who did not want to fly on a Qantas plane would have the option of waiting an hour for the next Air New Zealand flight.


Joint flights

* Air New Zealand and Qantas hope to share seats on the transtasman route.
* The airlines maintain they will still compete actively for passengers, who will book and pay through their preferred airline.
* In New Zealand the deal must be approved by the Minister of Transport but it does not require Commerce Commission clearance.