Frill-free Virgin says it can slash NZ fares

By SCOTT MacLEOD transport reporter

Australian airline Virgin Blue is hinting it will slash airfares and fly neglected routes if it hits New Zealand skies.

The no-frills carrier revealed yesterday that it had a team of staff analysing the economics of our air routes.

Virgin Blue's owner, British entrepreneur Sir Richard Branson, has reportedly ordered its Australian chief executive, Brett Godfrey, to meet Transport Minister Mark Gosche as soon as possible.

The airline needs Government approval to fly in New Zealand because it is British-owned and therefore not covered by the open skies agreement between New Zealand and Australia.

Virgin said it could sell cheap fares and still make money where Qantas NZ failed, by cutting costs on extras such as air-bridges, inflight meals, newspapers and airport facilities.

The biggest savings could be for people who chose to travel at "the last minute" or who changed their flight plans after booking.

Virgin spokesman David Huttner said the no-frills, low-fare approach could certainly work in New Zealand.

The tentative plan was for a transtasman service blended with domestic flights on main routes such as Auckland-Wellington-Christchurch. But Virgin was also keen to develop routes neglected by existing airlines.

It was too early to say what those routes would be, but Mr Huttner mentioned smaller cities such as Palmerston North and Dunedin, and direct flights from Australia to Queenstown during the ski season.

In Australia, Virgin saves money by selling tickets over the internet and offering basic facilities. Its Boeing 737 aircraft can spend less than 30 minutes on the ground between flights.

The company hopes to be flying domestic routes here within a year, and possibly by Christmas.

Mr Huttner said Virgin had a price structure that featured fewer penalties or lower fares for last-minute bookings and changed flights.

The airline did not want to compete head-on with the high-quality services of Air NZ. Instead, it would aim to lure budget travellers out of cars and trains.

"We're not a five-star hotel, we're a three-star hotel," he said. "But if you take a last-minute flight from Auckland to Wellington, my belief is that we could cut that fare in half."

Two Australian analysts said yesterday that Virgin had a good track record for price-cutting. It and another airline, Impulse, started a price war in Australia that has slashed some fares in half.

Ian Thomas, of the Asia-Pacific Aviation Centre in Sydney, said Virgin's entry would press Air NZ at a time it was having problems with its subsidiary, Ansett Australia.

There was little doubt that airfares would drop.

Air NZ declined to comment on Virgin's plans.

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