How has the trans Tasman aviation market evolved over the past three years?

Since the Australia-New Zealand Closer Economic Relations Trade Agreement (known as the CER Agreement) came into effect in 1983, the Australian and New Zealand economies have become increasingly integrated.

Integrated economies mean fewer trade barriers, and fewer trade barriers mean more trade. Australia, by far, accounts for the highest number of tourism arrivals into New Zealand, though China recently surpassed New Zealand as the biggest tourism arrivals market for Australia.

Still, the trans Tasman aviation market is one of the most active globally, with close to 450 flights per week between Australia and New Zealand. So, what’s changed over the past three years?

GRAPH – Trans Tasman capacity from 10-Aug-2015 to 12-Aug-2018

While capacity has grown quite slowly, market shares have fluctuated

 Seat capacity on trans Tasman aviation operations only increased from 88,080 to 91,176 from 10-Aug-2015 to 12-Aug-2018 – a growth of 3.5% over three years. This is despite the addition of two more airlines operating in the market, albeit via fifth freedom rights: AirAsia X and Singapore Airlines. For this analysis, AirAsia X and Singapore Airlines will not be included.

From the table above, it can be extrapolated that Air New Zealand has retained its designation as the largest airline presence on the Tasman based on capacity. The airline has added 5.57% more seats in the past three years, and its market share has edged upward from 33.9% to 34.6%.

Virgin, whose partnership with Air New Zealand is due to end in late Oct-2018, has grown capacity on the Tasman by 12% and its market share now stands at 12%. Together, the Air NZ/Virgin partnership accounts for approximately 47% of trans Tasman seat capacity.

The most striking growth, however, is from Qantas – jumping from an 18.5% market share to 27% in three years. Seat capacity by Qantas metal has expanded by a strong 51.2% on the Tasman in the past three years – but how was this achieved?

Emirates and Jetstar reduce their roles, allow Qantas to become the premier airline

On 24-Mar-2018 Qantas and Emirates received approval from the Australian Competition and Consumer Commission to continue their partnership until 2023. As part of the new arrangements, Qantas halted operations to Dubai in favour of services to Singapore, and Emirates significantly reduced its trans Tasman operations – instead favouring codeshares with Qantas.

Emirates previously had significant fifth freedom experience in New Zealand, competing for several years on multiple trans Tasman routes to Australia. Emirates now serves only one trans Tasman route, compared to four just over two years ago, but has resumed expansion in New Zealand with the new Auckland-Bali-Dubai service.

At the same time, the Qantas Group has refocused Jetstar’s operations away from the trans Tasman market, with the LCC converging on destinations in the Asia Pacific. In the same timeframe that Qantas added 51.2% more seats on the Tasman, Jetstar’s capacity to Indonesia – its biggest country market – increased from 22% to 35%. In the past, Jetstar has operated as a pioneer for the Qantas Group on many city pairs, stimulating demand for its parent company to replace the LCC later with a higher-yielding service.

In the past three years Jetstar’s seats have declined by 65.9% on the Tasman, causing the market to be dominated almost fully by legacy airlines, in terms of capacity.

More change to come for the market as partnerships shift

The trans Tasman aviation market stands to be shaken up even more in the future.

With the conclusion of the trans Tasman joint venture between Air New Zealand and Virgin, Air New Zealand will move to partner with Qantas instead.

As the market stands today in terms of capacity, the Air NZ/Qantas partnership would account for almost 62% of the market. However, Virgin has already indicated that it plans to add capacity between Australia and New Zealand as soon as its partnership with Air NZ ends.

See related report: Virgin Australia’s trans Tasman upgrades: how partnerships can be an impediment to innovation and market stimulation

Considering the above, could it be that another capacity war is imminent in the Southwest Pacific aviation market?

CAPA will feature a panel discussion at its upcoming New Zealand Aviation & Corporate Travel Summit (17-18 Oct, Auckland) on the evolution of the trans Tasman market. The panel will explore: How will the market evolve now that the Air NZ and Virgin Australia partnership has dissolved?

  • What impact will the proposed Qantas/Air NZ domestic codeshare have on the competitive landscape in NZ?
  • Is a price and capacity war looming? Are yields in danger?
  • Will 5th freedom operators continue to withdraw as new aircraft technologies make non stops viable?

For more information or to register for the Summit visit