Pacific Blue exits New Zealand domestic market. A turning point in Australia-New Zealand aviation
As they evolve towards a single market, domestic New Zealand and trans-Tasman airline operations have become increasingly competitive and overcrowded, with the global financial crisis and overcapacity further pressuring demand and yields in the region. As Virgin Blue Group's Pacific Blue exits the New Zealand domestic market, the scene looks set for a full fledged Australasian confrontation between two major competitors - in one corner the large and well entrenched Qantas Group with its dual brand strategy and in the other the emerging partnership of Air New Zealand and Virgin Blue. Since the two smaller carriers proposed their trans-Tasman codeshare in May-2010, Qantas now knows it is clearly on the opposing team and is likely to ramp up its competitive thrust. This in turn almost inevitably will push Air NZ and Virgin to explore closer ties - for which there is considerable logic.
Virgin Blue group withdraws from New Zealand domestic operations
Overcapacity and yield pressures in the Australian domestic market, along with the need to establish a comprehensive network, have encouraged Australian airlines to set their sights to the trans-Tasman and domestic New Zealand market. This brought further pain to New Zealand's national carrier. But the competitive pressure was also too much for Virgin Blue's Pacific Blue which, under new leadership, has announced plans to withdraw from the domestic market, having lost "tens of millions of dollars" there.
Meanwhile, Air New Zealand and Virgin Blue have sought regulatory approval to cooperate in the trans-Tasman market between the two countries. But the proposal stopped short of seeking to address the Australian or New Zealand domestic markets under the alliance - probably because this might jeopardise competition authority approval of the application (it would also cause the often over-zealous New Zealand Commerce Commission to become involved, whereas the proposed codeshare is a matter only for the Ministry of Transport, as a bilateral issue).
And a dynamic duopoly now remains - with increased competition likely
However, the agreement does mark a change in the competitive situation in the South Pacific market: The New Zealand market will now become a duopoly, albeit dynamic. But this is unlikely to be a comfortable affair; Jetstar will be fighting to capture market share, suggesting a continued discount battle on domestic trunk routes. Meanwhile, a reinforced combination of Air NZ and Virgin/Pacific Blue on trans-Tasman routes should ensure no reduction of competition in that near-bloodbath international market too.
This implies a clear competitive realignment: Virgin Blue/Air New Zealand vs Qantas/Jetstar. The battle is now on. Air New Zealand's lucrative regional market possibly to become the next area under fire. With intensified hostilities, it is probably only a matter of time now before Qantas/Jetstar takes the next logical step of chasing Air New Zealand into its lucrative regional corners - a move which would require introducing some of Qantas' Q-400 turbo-props domestically.
Nonetheless, the difference between having three airlines and two competing in a small domestic market is substantial and the short term reduction is much more than arithmetic. Without a Pacific Blue, prepared to sacrifice millions of dollars in the cause of establishing a network operation, there will undoubtedly be a marked shift in market pricing, even if Jetstar does continue to seek market share through lower fares.
Virgin Blue group redeploys its fleet
As described in the separate CAPA report (Virgin Blue restructure to stimulate change at home, as Qantas and Tiger sharpen their attack), Virgin Blue has announced a restructuring of the way it is to deploy its narrow and widebody fleet. As Pacific Blue ceases operations in the New Zealand domestic market, the carrier will redeploy the New Zealand-based B737 aircraft on trans-Tasman and medium-haul international routes.
In an interview with Business Day, Virgin Blue CEO, John Borghetti, commented that the "prospects of it turning a profit [in the New Zealand domestic market] are not good so there really is no point continuing". Mr Borghetti declined to reveal the extent of the losses, stating only that they had been in the "tens of millions" of dollars since it began there about three years ago.
Mr Borghetti also insisted that Virgin Blue's planned commercial agreement with Air New Zealand on trans-Tasman services had nothing to do with its decision to pull out of New Zealand, where the carrier currently has a 7.5% domestic capacity share in the market. However, if the Australian carrier is to be seriously competitive in attracting business and corporate markets, it is unthinkable that it would be totally unrepresented in New Zealand. For that there are now only two options and Jetstar is unlikely to be the one.
Domestic New Zealand capacity: Aug-2010
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Carrier |
Number of Seats |
Percentage |
|---|---|---|
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204,985 |
81.53% |
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27,258 |
10.84% |
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18,720 |
7.45% |
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450 |
0.18% |
Jetstar now to expand domestic New Zealand operations; New Zealand an "active pursuit"
In an immediate response to Virgin Blue's decision, Jetstar announced it would significantly grow its domestic New Zealand operations over the next year "solidifying its position as New Zealand's second airline".
The carrier has previously stressed that it is in "active pursuit" of future growth options within New Zealand and has plans rapidly to expand its presence there, moving more A320s into the domestic market. The carrier also previously noted plans "actively" to review value-based long-haul flying. Jetstar Group CEO, Bruce Buchanan stated the carrier plans to launch services to a number of new markets with the carrier considering direct services to Asia and North America and three or four new trans-Tasman routes in addition to all routes where Virgin withdraws.
Jetstar has been steadily making inroads in the New Zealand domestic market, after a less than auspicious start in Jun-2009, when it took over from another Qantas subsidiary, JetConnect, and faced various annoying operational and customer service glitches.
Those issues have long since been overcome and, upon the release of its latest growth plans, Mr Buchanan, said: "Jetstar is to further expand our fledgling domestic New Zealand operations. We plan to further grow our existing domestic NZ routes and will investigate new destinations in line with our strong and expanding market presence since commencing domestic flying in June 2009. Jetstar has embedded itself as one of NZ's two domestic airlines and as the clear low fares leader we will continue to invest in new services and growth."
The airline has announced it will position an additional two A320 aircraft in New Zealand within the next 12 months, bringing its fleet of New Zealand-based aircraft to eight. A seventh aircraft will enter service in Dec-2010 with an eighth anticipated to commence at the end of 2010, early 2011.
Jetstar stated its seventh A320 aircraft will support more domestic and trans-Tasman flying including the launch of Melbourne-Queenstown, Gold Coast-Queenstown and Auckland-Cairns flying, as well as incremental Auckland-Wellington and Auckland-Queenstown services. Mr Buchanan also stated Jetstar would look to build more frequencies from existing key ports in Auckland, Christchurch and Wellington with an expanded domestic operation "well in place" in advance of the 2011 Rugby World Cup (in the second half of 2011).
Jetstar currently operates on five domestic NZ routes between Auckland, Christchurch, Wellington and Queenstown and a trans-Tasman network commercially supporting ten routes, with an exiting fleet of six A320s, evenly split between its domestic operations and multiple daily trans-Tasman services from Christchurch and Auckland.
Mr Buchanan previously commented that this situation was ideal, stating: "The beautiful thing about the operation is that you've got full flexibility to rotate aircraft through it [domestic and trans-Tasman routes]". He added that the carrier has "seen the fares increase reasonably consistently month-on-month" since launch".
Announcements regarding aircraft scheduling with the additional fleet will be made in the near future.
Jetstar domestic New Zealand destinations: Aug-2010
Source: Jetstar
Mr Buchanan previously commented: "Jetstar now has a pathway towards future strategic growth in New Zealand through our ongoing success and strong customer demand for our low fare services. With a well established brand, strong and efficient on-time operations, a partnership in growth with major New Zealand airports and a great Kiwi workforce, Jetstar is well advanced to deliver this next round of sustainable low fares flight expansion."
Other stakeholder reactions to the Virgin Blue announcement
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Engineering, Printing and Manufacturing Union (EPMU) |
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Noted with some disappointment, the planned withdrawal of Pacific Blue from the New Zealand domestic aviation market in Oct-2010, but is confident that the ongoing strong growth of the domestic travel market will ensure future customer demand continues to be met. For FY2010, revenue from Pacific Blue's domestic travel operations is expected to represent around 1.3% (approximately NZD2 million) of Auckland Airport's total aeronautical revenue |
Stated the suspension of Pacific Blue's domestic New Zealand operations will result in the loss of up to 200 jobs, not create 100 new ones as the carrier claims. The airline employs approximately 450 New Zealand staff at its crew bases in Auckland and Christchurch and its Christchurch head office. EMPU added Pacific Blue is also dependent on other service providers and suppliers, which will now be forced to scale back operations due to the loss of work |
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House of Travel |
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Expressed disappointment at Pacific Blue's announcement that it will cease domestic services. The carrier currently operates 21 times weekly Wellington-Auckland service and 14 times weekly Wellington-Christchurch services, which account for approximately 12% of Wellington's air traffic on these routes. Wellington Airport also welcomed Jetstar's announcement that it will introduce two A320 aircraft into the New Zealand market by early 2011 |
The New Zealand travel agency claims there will now be fewer cheap fares in the domestic market with the withdrawal of the airline. The agency stated the airline was a "very big seller". |
Small NZ domestic market unable to sustain three airlines; dynamic duopoly remains
The decision to pull Pacific Blue out of New Zealand has been tipped for more than 18 months, especially after Jetstar replaced its parent, Qantas, on domestic routes in New Zealand last year.
Air New Zealand CEO, Rob Fyfe, has also predicted for some time that one of the players in the market (namely Pacific Blue, with its "unsustainable" operations) was likely to exit the market, describing the New Zealand market as too crowded, with three airlines competing in the New Zealand market, which has just 4 million people.
Back in Jun-2010, Mr Fyfe commented: "I've clearly been on the record for probably 18 months saying that I don't believe the Virgin Blue position is sustainable in New Zealand. And it doesn't surprise me at all that a new CEO coming into the business would want to look at whether that position is sustainable. I've got a tremendous respect for the Virgin operation in Australia - I think they've done a very good job establishing themselves as clear No 2 player in Australia - but some of the extensions of their business model offshore, I think, are certainly proving to be very challenging".
Qantas to look at New Zealand regional market?
Pacific Blue's B737 network in New Zealand focused only on the main centres, plus Dunedin and Queenstown, rather than addressing the lucrative regional market, despite speculation that it planned eventually to utilise its ERJ regional jets to make deeper inroads.
Pacific Blue New Zealand network: Aug-2010
Source: Virgin Blue
However, the impact of Pacific Blue was quite noticeable - on its arrival, it was credited with lowering domestic fares by approximately 20%. Now, with Jetstar quickly moving to expand its presence in the market, it is unlikely that Pacific Blue's departure will result in a drastic airfare increase in the short-term, but there will inevitably be improved yields for the two left standing.
With the likelihood that Qantas will now focus more aggressively in the domestic New Zealand market, attacking some of Air New Zealand's lucrative regional routes in due course - probably within the next 24 months at least - this fare dynamic will certainly continue to produce surprises.
Although relatively small, the regional cities deliver high yielding traffic, which frequently connects through to trunk routes. They are therefore essential to capturing the frequent flyers and business and corporate markets which in turn are becoming more closely intermingled with the corporate objectives of all New Zealand and Australian airlines.
Air New Zealand domestic New Zealand market
Source: Air New Zealand
Air New Zealand operates over 500 flights per day to 26 domestic destinations - more than any other airline.
Qantas, which previously had an ownership position in Air New Zealand, sold out of the carrier in Jun-2007, relinquishing its 4.2% stake. A Qantas proposal to purchase a 20% stake in the carrier was previously rejected by the New Zealand Government in 2002, with more recent proposals to combine in one form or another withdrawn following rejection by competition bodies..
The proposed Air New Zealand/Virgin Blue agreement clearly marks the end of any attempted cooperation relationships between the carriers.
Tasman market challenged by "intense competition" and "unstable market dynamics"
The trans-Tasman market has also quickly become a key battleground for Qantas Group, Virgin Blue and Air New Zealand.
Air New Zealand's Rob Fyfe, upon the release (in Feb-2010) of the carrier's financial results for the six months to Dec-2009 commented that the Tasman and Pacific Island markets continue to be challenging ones, with "intense competition". Mr Fyfe subsequently commented that the market remained "unstable", with demand continuing to fall despite a reduction in ticket prices, but suggested that demand on the routes is likely to reach equilibrium within two to three years.
He added, "unstable market dynamics have persisted in the Tasman market as airlines take on fifth freedom flying at marginal cost" - in a not too subtle dig at Emirates (by the number of available seats, Emirates is the fourth largest carrier operating between Australia and New Zealand, as the carrier utilises larger, widebody aircraft, or the fifth largest by passenger numbers. Emirates is currently the largest carrier on the Sydney-Christchurch route, ahead of Air New Zealand and Qantas).
The Air New Zealand-Virgin Blue trans-Tasman alliance; no equity, international routes only
This situation was hurting Air New Zealand, who were faced with few alternatives but to seek a tie up. As noted above, the carrier joined with Virgin Blue Group, in May-2010, in announcing their intention to seek regulatory approval to create an alliance on the trans-Tasman markets linking Australia and New Zealand. The proposed alliance will connect regional centres in Australia and New Zealand, but only as part of a Tasman journey and not including domestic-only travel in either Australia or New Zealand.
Mr Fyfe stated the alliance, if approved, will be "one of several measures to improve the airline's competitive position on the trans-Tasman in the face of the Qantas Group's two-airline move for regional dominance".
He added, "simple moves like integrating schedules, 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."
Australia-New Zealand capacity share: Aug-2010
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Carrier |
Number of Seats |
Percentage |
|---|---|---|
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26,276 |
35.16% |
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16,414 |
21.97% |
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12,420 |
16.62% |
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10,325 |
13.82% |
|
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6,726 |
9.00% |
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|
LAN |
1,578 |
2.11% |
|
988 |
1.32% |
|
|
Total |
74,727 |
100.00% |
However, if the alliance is approved, the carrier will make adjustments to their schedules, with Air New Zealand Deputy CEO, Norm Thompson, commenting: "They'll be adjustments to schedules. It would be crazy to have us flying on top of each other but both airlines have no intention of reducing frequencies. The key thing with the alliance is that it's a growth strategy, increasing load factors, growing markets and being able to add new services. We can't increase fares because we've got significant competitors who will continue to make it very competitive from a fare point of view. It's really important we grow the number of people travelling across the Tasman, in both directions … The days of load factors in the late 70s are over. Today you have to get loads in the mid-80s and that's our focus".
The combination should lead to more competitive pricing on the Tasman
Meanwhile, then-Virgin Blue CEO, Brett Godfrey, and Air New Zealand CEO, Rob Fyfe, stated their belief that the carriers' plans to form an alliance for trans-Tasman routes would result in lower fares, with Mr Godfrey stating the deal would "stimulate a new wave of competition in Australasian aviation". Mr Fyfe, meanwhile, forecast average fares could fall 10-20% due to the alliance, adding: "I don't think the lead-in fares will come down so much because they are so low already. But I think the average fares will reduce".
Under the proposed agreement, the carriers are planning to collaborate on future route and product planning, codesharing and frequent flyer programme links. Air New Zealand and Virgin Blue Group's combined market share would reach 56% on the routes if the alliance is approved.
Four key components of proposed Virgin Blue-Air New Zealand agreement
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Key components |
Areas covered |
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A broad free-sale code share arrangement |
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A revenue allocation agreement |
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Frequent flyer cooperation agreement |
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Lounge cooperation agreement |
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No impact on alliance relationships…
The airlines stated that while the proposed alliance is a significant development for both of them, it would not impact or place restrictions on any existing partnerships or alliances of either airline, downplaying a potential move by Virgin Blue into the Star Alliance, of which Air New Zealand is a member. Virgin Blue is meanwhile seeking a deep partnership with SkyTeam's Delta in the US market. The carriers added that the agreement is "not a signal of intention by Air New Zealand or Virgin Blue to take a shareholding in the other".
….and no cross-equity stakes
Meanwhile, Air New Zealand clarified that it had not purchased any shares in Virgin Blue, stating any such purchase would require Foreign Investment Review Board approval in accordance with the Australian Government policy on foreign investment, due to the substantial ownership of Air New Zealand by the New Zealand Government.
The carrier stated: "Air New Zealand is conscious that airline alliances such as the one planned with Virgin Blue frequently include an equity aspect, but the proposed alliance does not do so. The necessary regulatory approvals for the trans-Tasman alliance are still in process and Air New Zealand has had no indication of the outcome of this decision. A final decision on the alliance is expected by the end of the year. As a listed company on ASX and NZX, Air New Zealand is conscious of its market disclosure obligations and in the event of any such investment would advise the market in accordance with those obligations. Air New Zealand will make no further comment in regard to this speculation."
Regulatory reviews to take six months; facing opposition from Tiger, Wellington Airport and Hamilton Airport
Air New Zealand and Virgin Blue stated they have had trans-Tasman teams working on the alliance ' proposal for "some months", with regulators (the Australian Competition and Consumer Commission and the New Zealand Ministry of Transport) expected to take around six months to review the application on the proposed 'Australasian Airline Alliance Agreement' prior to authorisation. Air New Zealand has stated it does not foresee any competition hurdles that would stop the alliance from being approved.
Meanwhile, Wellington Airport, Cairns Airport, Hamilton Airport and Tiger Airways have separately opposed the proposed alliance, stating the alliance would negatively effect competition and will lead to increased fares and reduced capacity.
Wellington Airport also expressed concern that the New Zealand regulatory approach was "not set up to properly assess the alliance application against the impact of a loss of competition".
The airport explained that in Australia, the ACCC will go through a test which weighs competition and the net benefits claimed by the airlines, while in New Zealand, the Civil Aviation Act exempts at least part of these arrangements from assessment under competition law (which does not have any net benefits test).
Comments by stakeholders regarding Virgin Blue-Air New Zealand agreement
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Stated it would not oppose the proposed alliance but plans to "correct" some aspects of the application, including statements on its market shares. Qantas Executive General Manager, Rob Gurney, added that the carrier believes there is sufficient business demand on the trans-Tasman route and is committed to maintaining operations on the route, despite the proposed alliance. He added: "We still believe in the future of the business travel market on the trans-Tasman. At the same time we deploy our value-based airline Jetstar for the leisure segment. Between the two brands we believe we have the best and simplest proposition … for the customer … We'll be the only genuine business airline on the route. The Qantas proposition is very simple, there's no confusion around the product. There's no confusion around what you get for your money". |
Called for regulators to block the alliance, claiming the decrease in competition will lead to increased fares and reduced services. Managing Director, Crawford Rix, stated the two carriers were experiencing the "economic reality facing the whole industry" but should work on their own to overcome the issue. He continued: "If allowed to combine their activities, [the airlines] have the ability to eventually reduce flights and seat numbers, reduce frequencies or services on marginal routes, and could utilise their increased combined market power to raise prices and prevent potential new entrants". |
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Stated approval would "wind the clock back to the duopolistic past" adding the application "effectively seeks to remove the vigorous competition that has developed on the Tasman over the last few years". The report concluded: "There is no reason to think that any substantial and ongoing public benefits are going to arise by allowing two of the main players to collude". The airport stated the agreement would reduce the number of airlines operating scheduled trans-Tasman services from Wellington from three to two, while the Wellington-Brisbane route would have no competition. The airport added that the potential for additional competition from "5th freedom" carriers is "limited" in the markets. Wellington Airport CEO, Steven Fitzgerland, added: "We are concerned about the potential competition affects of the alliance based on the lessons of the past". The airport continued: "Whilst the alliance proposal states potential benefits for business travellers such as better connectivity, schedules and lounge access, reduced competition will most adversely affect the price-sensitive traveller. |
Warned that the alliance would lead to higher airfares, reduced capacity and ultimately adversely affect tourism across the Tasman. The airport also disputed the carriers' claims that existing competition is strong, indicating that many long haul airlines have dropped the route over the past six years (most recently Royal Brunei) with existing carriers reporting low load factors on the route, which the airport believes "could indicate that long haul operations across the Tasman are marginal". The airport added: "Low carriers to entry are questionable given the effective protection of the Tasman market". |
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Requested the ACCC exclude the Cairns-Auckland route from the proposed Virgin Blue/Air New Zealand alliance, stating that if the Cairns-Auckland route were included it would cause "substantial anti-competitive detriment and higher airfares on what will become a non-competitive route." The airport also cited "the irrelevance of the Alliance on this route to the aspired challenge for Qantas' high-yield business travel [and] the lack of public benefits on this route as proposed by the Alliance, as the focus will be on other city-pairs where there is competition with Virgin and/or Air New Zealand to other carriers". |
Gold Coast Airport COO, Paul Donovan, in a submission to the Australian Competition and Consumer Commission (ACCC), stated it "generally supports" the proposed Tasman alliance between Virgin Blue and Air New Zealand, stating it believes capacity could increase between Australia and New Zealand as a result of the agreement. However, COO, Paul Donovan, stressed that it is important that seat capacity on trans-Tasman services is not reduced as a result of the agreement. |
Air New Zealand has continually defended its plans, stating opponents have failed to substantiate claims the agreement will lead to higher fares and fewer services, responding to criticism regarding the monopoly structure on some routes. The carrier added that it would lodge a response to Wellington Airport's recent submission to ACCC over the potential affect on competition the proposed alliance with Virgin Blue will have on trans-Tasman routes.
Tiger Airways and AirAsia X the next to enter the trans-Tasman market?
In another concerning development for the incumbent carriers, Tiger Airways CEO, Tony Davis, stated Tiger Airways Australia is examining routes within a five-hour flying range from Australia for its A320 aircraft, including destinations in Indonesia, New Zealand and the Pacific islands. The CEO added the carrier has no plans to shift from its one aircraft-type fleet, as it allows it to maintain low costs.
Mr Davis commented: " My game plan is to use my A320 fleet as efficiently as possible on whatever routes make sense. Airports like Darwin, like Perth [are] those that can access Asia. Brisbane to Indonesia works, Gold Coast to Indonesia, or going east to New Zealand or the Pacific Islands there are opportunities there as well. What I'm doing is drawing a circumference around Australia, and saying, 'Where is there within five hours of here?' There's quite a few places. But what I'm not interested in doing is buying a different aircraft type to go seven hours … Flying the A330, or the [Boeing] 777 or Dreamliner that some of our competitors have chosen to do, you add another set of pilots, another set of engineers, spares, a different aircraft type which you've got to go out and purchase - all of those things add cost and complexity to the operations".
Meanwhile, AirAsia X CEO, Azran Osman-Rani, confirmed the carrier is considering launching services from the Gold Coast and Perth to either Auckland or Christchurch by year-end. Mr Osman-Rani stated the airline would have a "golden opportunity" to enter the trans-Tasman market if Virgin Blue and Air New Zealand's alliance is approved. He added the carrier would not consider operating trans-Tasman services from Sydney or Melbourne as the routes are already well served.
Mr Osman-Rani commented: "The earliest opportunity would be the end of the year. We have gone into the market and met the airports in New Zealand. We will get there - it's when … We are relentless on this - we are going to keep pushing [to fly to Sydney] … From a timing point of view we have to make sure we use this year to really deliver good profits, otherwise there is not a listing story. We have to fund our own growth and, with the plane orders that we have, we won't reach a point where cash surplus from operations is enough to fund the new planes, so we have to close that gap through a new equity listing".
Outlook: A battle in New Zealand becomes the catalyst to a genuine Australia/New Zealand single market
All of this adds up to an unavoidable conclusion that the highly competitive trans-Tasman and combined Australia/New Zealand domestic and international markets are going to continue to generate constant change and constant uncertainty for the incumbents. Although the nature of the competition will not always be consistently spread, it will certainly be intense.
Assuming the "logical" steps described above come about (a polarisation between Virgin Blue/Air New Zealand and Qantas/Jetstar; expanded cooperation between the two smaller carriers, probably into each others' domestic markets through codesharing; Jetstar's international expansion from a New Zealand base; and Qantas' eventual entry into the New Zealand domestic regional market with turboprops), then this should be seen as a highly positive development in linking the two countries' systems into a genuine single market.
For Virgin Blue, currently battling to go up-market into the enormously valuable corporate market, currently almost exclusively owned by Qantas (in Australia) and Air New Zealand (in New Zealand), this would be key to its future. For Air New Zealand, which has now cast its lot with Virgin Blue and will be more aggressively targeted by the Qantas Group, accelerating its access into the Australian market via its new partner will also become a priority. And to generate a broader international capability through improved access by each group to the respective domestic market must be good for consumers and for the economies of each country.
And meanwhile, thanks to the highly liberal access policies of each country (including allowing 100% foreign ownership of locally established airlines), there is always going to be a looming threat of entry by other carriers should market conditions look like becoming less consumer-friendly. The region's lowest cost operations, AirAsia, AirAsia X and Tiger Airways, have noted the opportunities that exist in the trans-Tasman market. In due course too, as Indonesian low cost operators gain momentum, they too will be increasingly interested in opportunities in these high growth markets to their south.
Turning points are relatively frequent in Australasia; the collapse of Ansett and Air New Zealand in 2001, the latter's renationalisation and the expansion of Virgin Blue -and now Tiger - to fill the gap, was a major trauma. But still Qantas/Jetstar remains highly dominant - with 65% domestic market share and probably 85% corporate share. A counterbalance to this would arguably be a positive for long term consumer interests. So we could be on the brink of a new reorientation of the power balance. It will not happen quickly and it will be a mighty struggle, but it does look as if the course has now been set.
The next challenge - for all concerned - will be to make the markets sufficiently profitable to secure a long term sustainable system. In an industry where the long term can be as little as five years, that may be a bridge too far.