Qantas weighs in with city services

By SCOTT INGLIS and GREGG WYCHERLEY

The price war for New Zealand's skies continued escalating yesterday, when Qantas launched a permanent domestic service.

Qantas executives announced that the airline would fly 10 Auckland-Wellington and eight Auckland-Christchurch round trips each day, starting next month.

The airline also said it was close to clinching a deal with Nelson-based Origin Pacific Airways.

Origin Pacific operates hundreds of flights each week to regional destinations. But despite this possible link, one travel operator believes regions excluded from main trunk routes could suffer in a price war.

Harvey World Travel general manager Rob Earles said that without competition, some regions would be penalised and prices could increase.

The price war, which has also drawn in British-owned airline Virgin Blue, began after Qantas franchise Qantas NZ, owned by Tasman Pacific Airlines, went into receivership 11 days ago.

Virgin Airways boss Sir Richard Branson said last night that consumers would suffer if Virgin Blue was denied access to the New Zealand market.

"Airfares will go through the roof. There will be a little bit of skirmishing to try to deter us from coming which will keep them down for a while, but ultimately if we don't come they will go through the roof again," he told the Herald from his London headquarters.

But he was confident of success. "We've always got there in the end when we've campaigned for something like this, and we hope New Zealand will be no different.

"The Australian Government was brave enough to let us in and the public have thanked them for it - we're confident the New Zealand government will do the same."

Virgin could succeed in New Zealand because of its strong brand and lower operating costs.

"We keep our costs down, we keep our fares down and we keep our profits down. A combination of all that means we can make a go of it."

But he said it would not be worthwhile coming to New Zealand unless Virgin also got rights to fly transtasman routes.

"It doesn't stack up economically - we need to have the seamless journey going on, so we do need the transtasman rights."

He said if there were regional routes that were not well served, such as Dunedin-Auckland, Virgin would consider new services.

Qantas' regional general manager for New Zealand and the Pacific Islands, Peter Collins, said the airline was in the New Zealand domestic market for good, and believed it could make money from it.

The domestic service will begin on June 1 and build up to 36 flights a day, using up to four Boeing 737s throughout the month.

Asked if Qantas would extend its present prices beyond this month or match further price-cutting by competitors, he replied: "They are competitive fares and we look forward to long-term competition."