Virgin Australia’s Rob Sharp says AirNZ/Qantas codeshare will have flow-on consequences on Tasman

written by australianaviation.com.au | June 6, 2018
Air New Zealand and Virgin Australia are “in the middle of a divorce”. (Rob Finlayson)

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.

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“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.”

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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However, total capacity on the Tasman is not expected to change significantly given the impact of Emirates having withdrawn its Airbus A380 flights from Brisbane, Melbourne and Sydney to Auckland in recent times.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.

A file image of a Tigerair Australia Boeing 737-800 VH-VUB at Melbourne Airport. (Brian Wilkes)
Tigerair Australia is replacing its A320s with 737-800s. (Brian Wilkes)

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.”

A Qantas Boeing 737-800 and Air New Zealand Airbus A320 at Sydney Airport. (AirNZ/Qantas)
Qantas and Air New Zealand have announced a new codesharing agreement. (AirNZ/Qantas)

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.

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4 Comments

  • David

    says:

    Interesting comment from Rob Sharp, that seems to be sour grapes more than anything. Australia has a population of 25 million, and New Zealand around 5 million. With such a limited population to draw on, Emirates have basically withdrawn from the cross Tasman services. There are only so many potential passengers that other airlines can hope to poach. Providing the code shares, will help both Qantas and Air New Zealand, and make it easier for the two airlines passengers.

  • Rod Pickin

    says:

    There must have been one doozy of a domestic in the boardrooms of Virgin Oz and Air New Zealand, the latter being the bride that was scorned, wow what a settlement we now see. I have to say though, considering all the facts, I am surprised that this new alliance with QF and TE is/will be allowed, – it is rather subjective and commercially vindictive. Very hard to compete in that playing field

  • Chris

    says:

    I agree with you. From NZ passengers point of view, Air NZ, Qantas and Jetstar are the main preferred carriers to cross the ditch. Virgin has been lucky, as their brand has been in the NZ public eye due to the airline association with Air NZ.

    I think the Virgin is upset, as they are losing Air NZ lounge access and NZ domestic services for it customers, especially premium customers. This means, Virgin will have to build a premium passenger lounge network and re-negotiate NZ domestic co-shares with Air NZ or use the current 5 ATR-500 being stored in NZ for a Tigerair or Virgin Australia domestic services within NZ.

  • cropo

    says:

    i wish qantas or virgin would fly Norfolk island route, very hard to get a good price from Air NZ

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