Three airlines join price war

By SCOTT MacLEOD transport reporter

A price war on domestic air routes begins with the first budget flights today and a third airline, Qantas, joining the fray.

Air New Zealand subsidiary Freedom Air took a rush of bookings yesterday for its first no-frills services between Auckland, Wellington and Christchurch.

But in a surprise late-afternoon announcement, Qantas Airways undercut Freedom, offering seats at $178 return between Auckland and Christchurch this month. Air New Zealand's cheapest Auckland-Christchurch return fare is $289.

And Virgin Blue, owned by the British budget air travel entrepreneur Sir Richard Branson, hinted that it might be able to offer a $60 one-way fare from Auckland to Christchurch after talks with Transport Minister Mark Gosche.

Virgin made it clear, however, that its interest in New Zealand internal services depended on permission to fly transtasman routes as well.

Qantas has been serving New Zealand domestic routes to help fill the gap left by the collapse of its franchise Qantas NZ, but has refused to say if it is here for good.

The Australian airline's general manager for New Zealand, Peter Collins, said yesterday that long-term options were still being considered.

An announcement would be made this week. In the meantime, Qantas would offer return flights between Auckland and Wellington for $75 each way ($150 return), and Auckland and Christchurch for $89 each way ($178 return).

Mr Collins said those fares included refreshments and points on the Frequent Flyer programme.

In Wellington, Virgin Blue executives were confident they could offer an Auckland-Christchurch fare similar to the $59 special rate the airline charges between Brisbane and Sydney.

Chief executive Brett Godfrey said: "We think you would have some at that price. We have thin profit margins, but we can do it if we fill all the seats."

The Australian-based Virgin subsidiary found there was little stopping its entering internal services in this country, but as a British-owned airline it has no automatic right to fly passengers across the Tasman under the open skies deal signed by Australia and New Zealand in November.

Virgin must gain a waiver from both Governments.

A representative of Australian Transport Minister John Anderson said he would consider a waiver, but was waiting for Virgin to formally apply.

But for New Zealand, Mr Gosche said Virgin's appeal raised a question about British restrictions allowing New Zealand aircraft to land only seven times a week.

He said 190,000 people flew from Britain to this country each year, our second-most important source of visitors. Yet Britain was refusing to let more of our planes land there.

Mr Godfrey said it was essential Virgin Blue was allowed to fly passengers across the Tasman. If not, costs like the $30,000 needed to fly each empty Boeing 737 to Australia for maintenance would make it too expensive to operate in New Zealand.

He maintained that Virgin Blue was Australian as its board was based there - and still hoped to be flying here by Christmas.

"We're not British. It's a stumbling-block that we don't believe should be an issue. The British Government will tell them to bugger off when they ask for landing rights, because we're not a British airline."

National Party transport spokeswoman Belinda Vernon said the British issue was "a red herring" and domestic travellers could miss out on Virgin's low prices if the Government "tried to be too clever."

Air New Zealand was taking no part in the discussion of Virgin's transtasman rights, according to public affairs manager David Beatson.

He said the landing rights issue was "an interesting development" because his airline lacked some of the opportunities in Britain that Australian airlines had here.

"We have to play by the rules and they should have to play by the rules. We're not lobbying on the issue, but we're standing back with interest."

Yesterday, one of New Zealand's biggest travel agencies, Harvey World Travel, said it was lobbying the Government to protect travellers in smaller centres.

General manager Rob Earles said he feared airlines would raise their fares in the regions to make up for the money they lost in cut-throat competition on the main routes.

Meanwhile, more than 4000 travellers rang Freedom in eight hours yesterday, booking out today's flights between Auckland, Wellington and Christchurch.

Vice-president Wayne Dodge said: "While others are talking about it, we've stepped in and done it."