The codeshare agreement between Air New Zealand and Qantas is bad for consumers and will have some flow-on consequences on the Tasman, Virgin Australia group executive for airlines Rob Sharp says.
On June 1, Air New Zealand and Qantas announced they would codeshare on each other’s domestic networks and offer reciprocal lounge access for eligible frequent flyers from October 28 2018.
Although Air New Zealand and Qantas said the codeshare agreement did not require regulatory approval, Sharp said Virgin Australia management was considering the question of what role regulators could have.
“We are having a look at it but nothing to comment on specifically except that domestic New Zealand you’ve effectively got the two main players there coordinating in the domestic market which surprises us,” Sharp said on the sidelines of a CAPA – Centre for Aviation conference in Sydney on Wednesday.
“It does have some big flow-on consequences onto the Tasman as well because they are 70 per cent of the Tasman.
“So there’s certainly a question that has been raised in respect to that. I won’t comment specifically on it except that our view is it is adverse to consumers.
“Because we are a challenger brand we will push quite hard competitively, but on the regulatory side we are still assessing that element of it.”
#VirginAustralia group executive for airlines Rob Sharp, speaking at the #CAPASummit, has described the end of his airline’s alliance with #AirNewZealand as a divorce. Further he described the recently announced AirNewZealand-#Qantas codeshare agreement as disappointing pic.twitter.com/Ma6WBCM75q
— Australian Aviation (@AusAviation) June 6, 2018
The Air New Zealand and Qantas codeshare announcement came less than two months after Air New Zealand said it would walk away from its existing trans-Tasman joint-venture alliance with Virgin Australia when it ended in October in favour of going it alone on the Tasman.
Sharp likened the current situation between Air New Zealand and Virgin Australia as being “in the middle of a divorce”.
The breakup will also lead to a planned increase in capacity on the Tasman from both carriers once the alliance is formally concluded at the end of October, as they seek to build their own presences in certain markets in a process Sharp described as a balancing of their networks.
However, total capacity on the Tasman is not expected to change significantly given the impact of Emirates having withdrawn its Airbus A380 flights from Brisbane, Melbourne and Sydney to Auckland in recent times.
“All up if you look back a couple of years ago, capacity is actually relatively flat,” Sharp said.
Virgin Australia is adding some new flights to Auckland, Queenstown and Wellington, while Air New Zealand plans to boost its schedule to Brisbane, Melbourne and Sydney.
Further, Virgin Australia has flagged deploying its low-cost carrier (LCC) Tigerair Australia on trans-Tasman routes.
Sharp cautioned that any potential use of Tigerair Australia internationally was still some time away, with the current focus now on the fleet renewal program where Airbus A320s are being withdrawn in favour of the Boeing 737-800 platform.
“We have indicated that it is an option for us to put Tiger across to the Tasman but I don’t think it is going to happen immediately,” Sharp said.
Asked during his presentation at the CAPA conference if Virgin Australia would consider operating domestic flights in New Zealand – as it did previously as Virgin Blue – Sharp said there was “certainly no immediate plans”, describing it as a very tough market.
The codeshare agreement signed between the two carriers involves Air New Zealand adding its NZ airline code on 85 Qantas-operated domestic services in Australia and Qantas adding its QF code on 30 Air New Zealand-operated domestic services in New Zealand.
Qantas-owned Jetstar also has a domestic operation in New Zealand with a mix of Airbus A320s and Dash 8 Q300 turboprops serving nine destinations.
While Jetstar added competition in a host of markets in New Zealand that previously had no alternative to Air New Zealand and led to lower fares, it has proved a challenging business.
Qantas already codeshares on Jetstar New Zealand’s domestic flights and Jetstar chief executive Gareth Evans said recently that arrangement would remain once the deal with Air New Zealand came into effect.
Further, Jetstar New Zealand would be “preferenced over Air New Zealand on like-for-like time bands”.
“We’re fully committed to Jetstar in New Zealand,” Evans told reporters on the sidelines of the International Air Transport Association (IATA) annual general meeting in Sydney on Monday.
“It’s a very very important piece of the Jetstar jigsaw puzzle.
“This codeshare with Air New Zealand has been designed in such a way that effectively Jetstar New Zealand is insulated or carved out from it.”
The Australian Airports Association (AAA) has come out against the codeshare agreement and called for competition regulators both in Australia and New Zealand to scrutinise the proposed tie-up.
However, Qantas has dismissed the AAA’s criticisms.