Virgin Blue stays keen but Qantas finds new obstacle

Discount airline Virgin Blue will make a formal proposal to the Government early next week confirming that it seeks a waiver to fly passengers across the Tasman.

But the future of Qantas Airways on New Zealand domestic routes is looking murky because of sudden turmoil in Australia.

Virgin said yesterday that it still wanted to come here despite a public disagreement with Transport Minister Mark Gosche on Tuesday and Wednesday.

No-frills Virgin wants to fly passengers within New Zealand, but says it must be also fly the Tasman for its plan to work.

But the airline is owned by British entrepreneur Sir Richard Branson and has no right to the transtasman route under our open skies deal with Australia.

Mr Gosche told Virgin the three solutions were: the airline could sell half of itself to Australians and New Zealanders; it could seek a waiver from both Governments; or Britain could grant better access rights for Air New Zealand.

The talks spilled into a public spat. Virgin claimed that Britain should be irrelevant to its chances. Mr Gosche countered that the airline still had the other two options.

Virgin head of commercial David Huttner said yesterday that his airline would formally ask the Government to waive the ownership issue and let it fly the Tasman.

If that was rejected, then Virgin would look at the other options.

"We prefer an exemption because Sir Richard is not going to change his British passport," said Mr Huttner.

"But if we're knocked back, then there's other ways to skin a cat."

Mr Gosche said on Wednesday that the Government had sent a fax to Virgin confirming it would consider a waiver, but Mr Huttner said his airline had not received it.

Virgin says it is still keen to fly in New Zealand by Christmas.

Meanwhile, the long-term future of Qantas Airways in our skies is looking less certain because of the collapse of Impulse, another Australian cut-price airline.

Impulse has signed papers letting Qantas take over its aircraft, but Air New Zealand is trying to block the deal through Australia's competition watchdog.

Qantas executives said they might have to abandon New Zealand if the Impulse deal failed, because they would be short of aircraft.

The statement came just three days after Qantas announced a permanent service in New Zealand of 18 return flights a day.

Qantas spokesman Michael Sharp said the message was simply that Air New Zealand wanted a monopoly in its own country and was trying to stop Qantas' ability to come in.

"That's the point we are trying to make, but we remain committed to New Zealand."

Air New Zealand says it opposes the Qantas takeover of the Impulse aircraft because it would become dominant in the Australian market, reducing competition.

Better news came yesterday from Air New Zealand's no-frills subsidiary, Freedom Air, which promised it would keep flying domestically - even if the Australian airlines stayed at home.

Freedom vice-president Wayne Dodge said his airline hoped to secure a lease on a second domestic jet in two weeks, allowing it to boost daily flights from six to 16.

Freedom has been swamped with 10,000 calls since Monday, and is taking bookings as far ahead as August 2.

By Monday it expects to have flown 2500 people in its first week.

Mr Dodge said Freedom would change its fare structure at the end of this month, introducing restrictions so that its cheapest fares would be offered only 21 days in advance.

The Weekend Herald sought comment yesterday from eight out of 10 investors in the collapsed franchise Qantas NZ, but all refused to comment or failed to return the calls.

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