New Zealand

Qantas-Emirates alliance: the last piece of the puzzle falls in place across the Tasman

The final piece of the Qantas-Emirates alliance has fallen into place with the New Zealand minister of transport Gerry Brownlee giving his belated approval for the two carriers to extend their union across the Tasman by authorising a master coordination agreement. This will to all intents and purposes turn the Tasman market between Australia and New Zealand into a duopoly between the Qantas-Emirates Group and Air New Zealand-Virgin Australia partnership.

The Australian Competition and Consumer Commission (ACCC) had already granted Qantas and Emirates conditional approval for the trans-Tasman leg when it gave the final green light for the pair’s broader global alliance in Mar-2013. Mr Brownlee, who under New Zealand law has the authority to rule on arrangements between two airlines where this involves price or capacity fixing of international air services, had originally been expected to make his decision by the end of Mar-2013.

Singapore Airlines cements its partnership with Virgin Australia, joining ANZ and challenging Etihad

Singapore Airlines’ (SIA) move to nearly double its holding in Virgin Australia to 19.9% reinforces the SIA Group’s new strategy of focusing more on Asia-Pacific, including the Australian market. The recent purchase of an additional 9.9% stake in Virgin Australia from founding shareholder Virgin Group also dilutes the presence of SIA rival Etihad, which now owns about a 9% stake in Virgin Australia.

Although equity is not the main driver, the increased stake could give the SIA Group an edge as it looks to further deepen its codeshare partnership with Virgin Australia, particularly in the key Australia-Europe market.

Independent Virgin Australia has quickly emerged as SIA’s most significant partner in the two years since the two airline groups first forged a codeshare agreement, a further testament to the waning importance of global alliances. SIA, which is a longstanding member of Star but has traditionally taken a passive role in the alliance, is keen to embed its relationship with Virgin Australia as other current and prospective partners circle.

Qantas and Virgin Australia build substantial virtual global networks

Australian carriers Qantas and Virgin Australia have built substantial virtual global networks with each relying on large long-haul operators to carry their passengers beyond their Asia-Pacific networks.

Qantas and Virgin Australia have recognised that as end of line carriers they cannot compete with network airlines such as the Gulf and Asian carriers that can aggregate passengers at their geographically advantageous hubs. The Australian carriers are instead using the long-haul capacity pipelines these carriers offer to serve markets they lack the capital to service in their own right.

Virgin Australia led the way, initially with a neighbourhood alliance with Air New Zealand effectively merging their trans-Tasman business. The carrier, under the stewardship of new CEO John Borghetti struck a deal with Gulf carrier Etihad, securing access to the European market. Similar deals with Delta Air Lines followed adding the United States coverage and finally perhaps the most important of them all, Singapore Airlines.

Qantas struck back with its own seismic announcement that it would partner with the biggest of them all, Emirates in a move that provides the platform to stem heavy losses on its long-haul network and return it to profit in FY2015.

Virgin Australia and Air New Zealand apply for renewal of trans-Tasman alliance, without conditions

Virgin Australia and Air New Zealand have applied to the ACCC for a five year renewal of their trans-Tasman alliance which expires on 31-Dec-2013. The renewal would replace the current arrangement that was approved for three years in Dec-2010.

This time around, however, the world has changed. Virgin Australia and Air NZ have requested that the carriers' need to maintain a base level of capacity on the trans-Tasman as a whole, and grow seasonal capacity on some routes, should be dropped as conditions from the renewed authorisation. The airlines claim they have demonstrated that their alliance is not harmful to consumers and has resulted in competitive responses from other airlines.

Furthermore, Virgin Australia and Air NZ say the capacity conditions may in fact be harmful to consumers by preventing the carriers from efficiently reacting to changes in market conditions.

The possibility of Qantas and Emirates extending their global alliance to the Tasman emphasises the need to renew the Virgin Australia-Air NZ alliance, according to the carriers.

Air New Zealand poised to deliver on "go beyond" strategy, still facing stiff competition

Air NZ has returned to “growth mode” adding capacity to North American routes, resuming daily operations to Tokyo and Shanghai and strengthening its short-haul network.

After restoring its long-haul network to profitability and reporting a 300% increase in underlying profit for the first half of FY2013 Air NZ is focusing on developing a partnership-based Pacific Rim network.

The carrier has forged an alliance with Cathay Pacific on the Auckland-Hong Kong route and consolidated its China mainland capacity to Shanghai, dropping Beijing. Capacity to North America has been increased partly taking advantage of being handed a monopoly on the trans-Pacific after Qantas pulled its Melbourne-Auckland-Los Angeles service in May-2012, redeploying the A330 capacity in the Australian domestic market to support its domestic battle with Virgin Australia.

Closer to home, a new short haul fleet of A320s and ATR72-600s are arriving to drive domestic growth and keep a menacing Jetstar at bay.

Air Niugini expands in growing economy despite service challenges and weak balance sheet

Air Niugini, Papua New Guinea’s national carrier, has rapidly expanded in recent years as foreign investment pours into the country to develop its wealth of natural resources, driving demand for domestic and international air travel.

The state-owned carrier plans to add more aircraft and up-gauge key domestic services to Boeing 737 in 2013 to keep pace with a growing economy and competitor Airlines PNG. But the financially strapped carrier is struggling with poor on-time performance while also being criticised for charging excessive fares. Deregulation has brought some domestic competition, but airlines from neighbouring Philippines and Solomon Islands are struggling to break through protectionist barriers.

Aviation provides the single most important form of transport in the mountainous country which lacks a major road network linking the capital, Port Moresby, to other major centres. But the poor state of aviation infrastructure including runways and terminals poses a substantial hurdle to expansion of air services.