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.