Virgin Australia and Air New Zealand plan to share flights across the Tasman – a move that airports fear would stop Virgin re-entering the New Zealand market, lessening competition and driving up prices.
The Ministry of Transport in New Zealand and the Australian Competition and Consumer Commission are both considering the application lodged in November last year.
Under the proposal Air NZ would set the prices.
But Auckland Airport chief customer officer Scott Tasker said the plan would benefit Virgin Australia customers at the expense of New Zealanders flying to Australia.
“Most of the outlined benefits accrue to Virgin Australia travelers who wish to fly across the Tasman, in particular loyalty and frequent flyer customers. These benefits to a specific group of mainly Australia-based consumers are strongly outweighed by the anti-competitive impact on the Tasman market that will impact a much wider group of consumers.
“Without committing to increased capacity, new high-yielding customers accessed via the Virgin Australia network would simply displace existing Air NZ customers and put upward pressure on airfares, which is not in the broader interests of consumers.
“This means New Zealanders wanting to fly on the Tasman risk paying higher fares or not being able to secure a seat as they have been taken up by a Virgin Australia passenger. It may be in the interests of airline to seek the highest paying customers, but not consumers.”
“The applicants have not articulated any benefits for New Zealand consumers travelers flying into Australia, nor have they made any commitment to increase seat capacity by adding additional flights.”
This argument was also raised by Christchurch Airport aeronautical development general manager Gordon Bevan who noted the current operation of the trans-Tasman aviation market was less dynamic than before Covid-19.
“Australia to New Zealand fares have increased by about US$100 per sector between 2019 and 2023.”
Gordon Bevan, Christchurch Airport
“In the case of Christchurch Airport, there is 15 percent less overall capacity on trans-Tasman routes than there was in 2019, fewer routes and fewer participating airlines. As a result, the market share of the two major incumbent airlines and average load factors are higher than there were before Covid.
“The market is both less dynamic and less competitive than it was. This is reflected in rapid increases in air fares between the two countries. Australia to New Zealand fares have increased by about US$100 per sector between 2019 and 2023 (data is taken from IATA’s AirportIS product).
“Similar increases are recorded on average Australia to Christchurch fares and average Sydney to Christchurch fares.”
Similar concerns were raised by Sydney Airport executive general manager for aviation Rob Wood, who told the Australian regulator the trans-Tasman market was one of the least-recovered since Covid-19.
“Prior to the Covid-19 pandemic the Qantas Group, Virgin Australia and Air NZ were the most effective competitors in this market and consumers greatly benefited from the strength of this competition both in terms of network choice and price.
“In this context, Sydney Airport is concerned that the proposed conduct, if authorised, is likely to have a material effect of disincentivising Virgin Australia from recovering trans-Tasman services using its own aircraft and providing much-needed competition.”
New Zealand Airports Association policy director Steve Riden noted the market share held currently in the duopoly Qantas and Air NZ was extremely high at 91 percent and with Air Asia X leaving in February this would further increase.
“In our view, Virgin Australia is the only Australian carrier with the aircraft and customer base to operate on the Tasman, therefore Virgin Australia is the only airline that can provide genuine competition.”
A code-share agreement is an arrangement between two or more airlines who want to advertise the same flight involving New Zealand destinations, but under their own airline names and flight numbers.
Air NZ already has a codeshare agreement with Qantas.
“The reinstatement of Virgin Australia’s direct flights would be a step towards more affordable and environmentally conscious travel for underserved regions….”
Former Virgin Australia pilot
Queensland Airports chief commercial officer Adam Rowe however said the application may be beneficial in the short-term, so was opposed to the asking duration of five years, putting forward support for a three-year arrangement.
He said after three years Virgin Australia should be expected to re-enter the trans-Tasman market using its own “metal”.
Virgin Australia operates only one service to New Zealand which is into Queenstown.
Queenstown’s chief executive Glen Sowry said it supported the proposal so long as Queenstown airport was excluded – which the plan does propose.
Aside from airports, submissions against the plan included from an anonymous Virgin Australia ex-worker, who said the Australian airline should focus on getting back up and running again so it could employ people who were laid off when Covid-19 struck.
A Virgin Australia ex-pilot now living in New Zealand shared similar feedback saying having the airline back up and running would address the higher prices travelers were paying.
“Currently, return fares with Air New Zealand from Dunedin to Brisbane, including baggage and meal for December 2023 to January 2024, are approximately $1455. In contrast, when Virgin Australia serviced this route before the pandemic, fares were frequently under $500— not accounting for the inflationary adjustment—with similar inclusions.
“The reinstatement of Virgin Australia’s direct flights would be a step towards more affordable and environmentally conscious travel for underserved regions like Dunedin.”
In the application Virgin Australia said the plan would not delay or disincentivise entry into New Zealand using its own aircraft – the Australian Competition and Consumer Commission has since asked for this claim to be substantiated.
It will make its decision by April this year, and the Ministry of Transport will advise Associate Minister of Transport Matt Doocey on whether or not to authorise the agreement “in due course”.
