Price war as Qantas hits back

By CATHY ARONSON

A price war on domestic flights has begun as Qantas prepares to slash fares to compete with Air New Zealand's new no-frills deal.

Air NZ yesterday cut its fares by up to 28 per cent for its new one-class, no-meal Air NZ Express. The service starts on November 1.

Qantas confirmed that it was reviewing fares after travel agents said the Australian airline had told them it would not be undercut.

But with prices set to fall, travel agents launched a campaign against Air NZ for axing their commissions.

The agents threatened to sell Qantas tickets instead and claimed the advertised Air NZ fares were misleading.

In the past month, Qantas has increased its flights and dropped its fares, with return Auckland-to-Wellington trips as low as $197.

Air NZ's lowest fare for the same journey has dropped from $199 return to $120 if booked over the internet.

But the fares will be limited to selected off-peak flights, they will not include airpoints and no refunds or changes will be allowed.

Air NZ's website received so many hits yesterday that it froze as travellers tried to log on for the latest deals.

The Consumers' Institute welcomed the competitive fares but questioned how long they would last if Qantas took a long-rumoured 25 per cent stake in Air NZ.

Air NZ yesterday reiterated that it had not reached an agreement with Qantas, despite four months of talks and claims by National Party leader Bill English last week that the sale was a done deal.



The Government owns 82 per cent of the national carrier after spending $885 million to bail it out last year.

Air NZ managing director Ralph Norris said the fares were not a one-off special and represented a new brand of no-frills flights designedto fend off competition.

"If it was a short-term offering, it would rebound on us and leave the opportunity open for someone else."

Australian budget carrier Virgin Blue has also been eyeing New Zealand after filling a gap in the Australian domestic market when Ansett collapsed last year.

The president of the Travel Agents' Association, James Langton, said the competition was waiting to pounce on Air NZ and the low prices would not keep them away.

"Air New Zealand have done this because competition is biting at their heels. They want to keep their dominance in the marketplace, but Qantas have informed me this morning that they will not be undercut."

Air NZ budget subsidiary Freedom Air will stop domestic flights next month, leaving Air NZ and Qantas to compete.

Mr Langton said the new fares were not cheap, because Air NZ had increased prices by 30 per cent in the past two years and reduced them now because of competition.

His association has placed an open letter in today's Herald urging travellers to use travel agents and warning them against booking online.

The travel agents claim the advertised Air NZ fares are misleading and could be undercut by Qantas.

Their campaign is in protest at Air NZ's decision to axe a 4 per cent commission in favour of online booking.

Mr Langton said Air NZ wanted to stop travel agents providing the cheapest deal.

He said the no-frills deals announced did not include GST and service levies and a $10 booking fee if not booked online.

That would increase the advertised $120 return Auckland-to-Wellington fare to $175.

He said the website generated only 10 per cent of Air NZ's bookings and the cheap deals could not be booked overseas.

Mr Norris reacted by questioning whether the travel agents were acting in their customers' best interest.