Virgin Blue and Air New Zealand have announced details of their planned revenue sharing trans-Tasman alliance proposal, first revealed to the ASX last week, confirming it will be a non-equity arrangement.
The airlines said in a joint statement released on May 3 that the alliance will allow them to “strengthen their competitive offering” on the trans Tasman market, and that they will “collaborate” on future route and product planning, codesharing and frequent flyer program benefits. The alliance would also connect regional centres in Australia and New Zealand “but only as part of a trans-Tasman journey and does not include domestic-only travel in either Australia or New Zealand,” the statement reads. “The agreement is also not a signal of intention by Air New Zealand or Virgin Blue to take a shareholding in each other,” the statement asserts, and the two will continue to compete on the New Zealand domestic market.
The carriers say the alliance would involve a “broad” free sale codeshare agreement; a “revenue allocation” agreement for all trans-Tasman flights and a joint trans-Tasman network planning and revenue management team; reciprocal frequent flyer scheme benefits; and a lounge cooperation agreement. The two airlines will also aim to closely align their trans Tasman product offerings.
“Simple moves like integrating schedules and capacity, allowing customers to book multi-sector journeys on one code, providing reciprocal loyalty scheme benefits and reciprocal lounge access for qualifying customers will be a compelling proposition for leisure and business travellers on both sides of the Tasman,” said Air New Zealand CEO Rob Fyfe.
“We are two of the world’s most innovative and nimble airlines and by working closer together we believe we can deliver significant benefits to customers and shareholders,” said Fyfe, who stressed that seat capacity on the trans-Tasman under the alliance arrangement would grow more quickly than would otherwise be the case.
“This market stimulation is likely to allow Air New Zealand and Virgin Blue to harness the alliance benefits to start new routes or additional frequencies,” said VB Group CEO Brett Godfrey, who told a May 3 media call that under the alliance the two carriers would have “just under” 50 per cent marketshare of the trans Tasman.
“We believe we are well matched and the timing is good and incoming chief executive, John Borghetti, thoroughly supports this strategy,” Godfrey said.
The airlines say they have been working on the trans-Tasman proposal for “some months”, and that today they will file applications with the Australian Competition and Consumer Commission (ACCC) and the New Zealand Ministry of Transport seeking approvals for the alliance. Godfrey told the media phone hookup that he thought regulatory approval would take in the order of six months.