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Air New Zealand and Virgin Blue Airlines Group announce trans-Tasman alliance proposal

3-May-2010 10:09 AM

Air New Zealand Ltd and Virgin Blue Airlines Group announced (03-May-2010) their intention to seek regulatory approval to create an alliance on the trans-Tasman (Australia-New Zealand routes). The proposed alliance will allow the airlines to strengthen their competitive offering in the market and to collaborate on future route and product planning, codesharing and frequent flyer programme benefits. The carriers stated they have been working on the alliance proposal for "some months" and will file applications with the Australian Competition and Consumer Commission and the New Zealand Ministry of Transport. The regulators are expected to take around six months to review the applications prior to authorisation. Details include:

  • Codesharing arrangement: Will include a broad free-sale code share arrangement covering all Tasman sectors currently operated by either airline, domestic Australian sectors as part of a connecting Tasman journey and domestic New Zealand sectors as part of a connecting Tasman journey. The carriers also propose a revenue allocation agreement under which revenue generated across all Tasman sectors currently operated by either airline, or which may be developed under the agreement, will be allocated between the two carriers. Meanwhile, a joint trans-Tasman Network Planning & Revenue Management Team, representing both airlines, will oversee the Tasman operation;
  • Frequent flyer programme/lounge reciprocity: A frequent flyer cooperation agreement will provide reciprocal loyalty scheme benefits to members of Air New Zealand’s Airpoints loyalty programme and Virgin Blue’s Velocity Rewards programme. The companies also plan to implement a lounge cooperation agreement that will ensure lounge access to qualifying guests of either airline.
  • Impact on alliances: The airlines said that while the proposed alliance is a significant development for both carriers, it will not impact or place restrictions on any existing partnerships or alliances of either airline;
  • Ownership: The carriers stated the agreement is "not a signal of intention by Air New Zealand or Virgin Blue to take a shareholding in the other";
  • Connection of regional centres: The proposed alliance will connect regional centres in Australia and New Zealand, but only as part of a Tasman journey and does not include domestic-only travel in either Australia or New Zealand;
  • Competitive reaction to Qantas Group: Air New Zealand CEO, Rob Fyfe, stated if the alliance is approved it 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";
  • Trans-Tasman capacity. Mr Fyfe stated the number of seats flown on the Tasman by the alliance carriers would grow more quickly than they would without the alliance. [more]