Virgin is taking a while to revise its network, but it certainly can’t afford to sit still
Air NZ had the advantage of knowing its plans in advance, so was able to pre-empt its former partner.
Virgin is slowly working through its future strategy, but the last thing it wants at the moment is a bruising fare war on the Tasman – something that a 40%+ capacity addition on Brisbane-New Zealand routes would promise.
But in theory, in order to retain a hold in the market, it will need to replace the codeshare seats it had previously sold on Air NZ’s metal. So, for example, in the first week of 2019, Virgin will have only 18% of the seats on the Tasman to sell, whereas in the first week of 2018 it was able to offer up to 50% of the seats, piggybacking on Air New Zealand’s 34% share.
That puts it at a significant disadvantage against its Qantas rival in the Australian market – something that flows through to on-carriage and frequent flyer loyalty, not to mention the lucrative corporate travel market.
What about Jetstar New Zealand?
There was a time when the Jetstar intruder was going to disrupt New Zealand’s highly profitable domestic market. That tone became much more muted in 2017, as Qantas gently refrained from moving more of its redundant Australian Dash-8s across the Tasman to operate regional routes.
There is an obvious overlap in domestic codeshare possibilities on these regional routes, where Jetstar operates head to head against Air NZ’s regional operations. Here Qantas will, rather ambiguously, “continue to codeshare on all connecting Jetstar New Zealand services”.
The opportunity – and challenges – for airports
Newcastle has been the first airport to attract a new Tasman route. There will be more, as the airlines look for new possibilities. Virgin will probably have to be more adventurous in this respect, as it looks to differentiate itself without adding a lot of metal – which is in short supply for now. It’s a good time for airports on both sides of the Tasman to get their marketing shoes on.
On the other side of the coin are the routes where Virgin + Air NZ were able to sustain a route that would not support two competitors.
Dunedin was quick to approach the two when the divorce announcement was made in Apr-2018, seeking some reassurance that the Virgin Australia-operated four times weekly Brisbane-Dunedin service, with Air New Zealand codesharing on the route, would continue. It is; for now.