How long can the airline lolly scramble last?

By SCOTT MacLEOD

It's May 5, 2002. Your sister is getting married and you must fly to Dunedin for her wedding. What are your options?

Once all the tumult in our domestic aviation market has settled down it is likely that you will have more - and probably cheaper - ways of getting there.

But there are many ifs and buts. Will Virgin Blue and Freedom Air fight a cut-throat price war? Will Qantas Airways keep Air New Zealand honest?

Perhaps more important is the question of whether you are leaving from Auckland, Northland or Waikato.

Will airfares tumble?


The rosiest possibility is that you will have the choice of two budget airlines and two traditional airlines that have forced each other to slash airfares by up to 50 per cent.

That was the situation in Australia until this week. During the past year, the cheapest airfares on some routes were cut in half as no-frills Virgin and Impulse tried to lure budget travellers.

Two bigger airlines, Qantas and Ansett Australia, kept their sights on business travellers and those people who would rather pay extra for "free" meals, airbridges, lounges and classier service.

If Virgin sells fares here as low as it has in Australia, you may be able to fly directly from Auckland, Hamilton or Whangarei to Dunedin for $150 return.

What is the worst-case scenario?

It is still possible that Virgin will stay at home, Qantas will pull out or Freedom will stop flying domestically and concentrate on transtasman routes.

Without those airlines there will be less competition in our skies. Airfares will stop tumbling and may slip back to what they were two weeks ago, before Qantas and Freedom started their cheap flights between Auckland, Wellington and Christchurch.

Will Virgin make a difference?

It is unclear whether Virgin will make it to New Zealand.

The Australia-based airline is allowed to fly inside New Zealand, but has a British owner, Sir Richard Branson, which means it has no automatic right under our open skies deal with Australia to fly passengers across the Tasman.

Virgin has said that it must fly the Tasman to make domestic flights viable, but our Government is grumpy with Britain for restricting our air access and is reticent about giving favours to one of its airlines.

Our Transport Minister, Mark Gosche, says Virgin's options are to sell half of itself to Australians and New Zealanders or obtain a waiver from the Governments of both countries.

The problem will also be fixed if Britain lets Air New Zealand fly there more than it is allowed to now, boosting our tourism.

Sir Richard says he is committed to New Zealand and will get here somehow.

Will the other airlines still be here?

If Virgin's bid falls over then it will no longer pose a threat to Air New Zealand, which may tell its no-frills subsidiary, Freedom, to stop flying domestically or raise its airfares.

If Virgin and Freedom leave the picture, then there will be no major airline offering budget flights in New Zealand. There are also questions about Qantas. The airline says it is here to stay, and will fly 10 Auckland-Wellington and eight Auckland-Christchurch round trips daily from next month.

But the Australian Qantas tends to offer top service and expensive fares. That means it will have to compete with Air New Zealand, a ruthless airline with a history of killing competitors - just ask Qantas New Zealand.

What if I live in Waikato or Northland?

It is much harder to say what will happen in regional areas. The reason is that most airlines want to cream the main trunk route between our three biggest centres, Auckland, Wellington and Christchurch. So far there is little evidence they will stray into provincial areas.

If the airlines ignore the regions then flying from our fourth main centre, Hamilton, to a wedding in our fifth-biggest centre, Dunedin, may cost twice as much as a flight from Auckland to Christchurch - despite the similar distance.

However, Virgin's spin-doctors say the airline is working out the costs for Dunedin, Hamilton, Palmerston North, Rotorua and other cities, and Freedom is also hinting it will examine the less-common routes once it gets more aircraft.

Perhaps the biggest hope for regional travellers lies with Qantas and Nelson-based Origin Pacific. It is understood that Qantas wants to stay on the main trunk and use Origin as a "feeder" service from the smaller airports.

If Origin and Qantas strike a deal, then it may be cheaper to fly a dog-leg route to that wedding. For example, a Raglan resident might drive to Hamilton, catch an Origin flight to Auckland, take Qantas to Christchurch, then another Origin flight to Dunedin.

This will obviously be much more expensive than a no-frills flight directly from Auckland to Christchurch.

Can the airlines keep selling cheap fares?


Virgin is hinting it can offer fares from Auckland to Christchurch for about $120 return - but only occasionally.

Virgin spokesman David Huttner says that in Australia the airline has sold fares as low as $118 from Brisbane to Sydney return - a similar distance to the two New Zealand cities.

But those fares were short-term specials. This week Virgin has been selling seats between Brisbane and Sydney for $160 return.

That is only slightly lower than some of the fares we have seen in New Zealand during the past week, such as Qantas' and Freedom's $178 return.

But both of those airlines may change their fares at the end of this month. It is likely that Qantas will slowly raise its fares to match Air New Zealand, whereas Freedom will aim to match Virgin - if it comes here.

So what will those fares be on May 5, 2002?

The simple rule is, the more airlines, the lower the fares. Australian analyst Ian Thomas, of the Asia-Pacific Aviation Centre, says that if Virgin comes here then flying will almost certainly be cheaper.

Are we big enough to support four airlines?

Probably not. All this kerfuffle in our airspace started two weeks ago when Qantas NZ died.

It simply couldn't compete with Air New Zealand, but the Australian Qantas has deeper pockets and is capable of giving Air New Zealand a stiffer fight. If Qantas starts losing money then it may pull out.

But some analysts, such as Christchurch aviation writer Les Bloxham, believe Qantas will stay here to ensure New Zealand has a One World airline in its skies. One World is similar to the Star Alliance that Air New Zealand has joined.

As for Freedom, it will probably stay as long as Virgin remains a threat.

Recent events in Australia suggest it is unlikely that we have enough room for all four airlines.

So how should I get to that wedding?

In the best case you'll be able to fly direct with the choice of four airlines and either cheap seats with less service or expensive fares with top-notch delivery.

But be warned - if there's only one airline left, it may be cheaper to drive

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