The collapse of the Air New Zealand-Virgin Australia partnership: good news for airports and consumers

Part 2. Rerouting Virgin on the Tasman

When this matrimonial swap occurs later next month, on 27-Oct-2018, Virgin will be left very much up the creek in terms of servicing both the Tasman and the domestic New Zealand market. It will be on its own. Theoretically, it still has codeshare opportunities with Air New Zealand, but it’s hard to see it being a fruitful ally in the future.

So where does Virgin Australia go from here? As we saw, until now it has relied on Air New Zealand to provide a lot of the capacity across the Tasman, as well as, of course, providing beyond-gateway access to New Zealand domestic points.

Without Air New Zealand, it now needs to fill a lot of those gaps if it is to be able to compete on reasonably parallel terms with the two major flag carriers. The first baby step was to announce a service between Newcastle, just north of Sydney, and Auckland.

(This route was actually pioneered by CAPA, managing to persuade Freedom Air, then Air NZ’s LCC subsidiary, to fly Hamilton-Newcastle early this century, but the operation only lasted a couple of years. It failed largely because it conflicted with its parent’s services, where there was a marketing agreement with Tourism NSW to focus on Sydney. Newcastle has a catchment of nearly one million people, and with solid marketing at both ends this has the potential to develop into much more than the tentative three times weekly seasonal service that Virgin has announced.)

Meanwhile, Virgin, deeply damaged by its punishing fare war with Qantas, has restructured and lumped its losses into a nasty looking financial result for FY2018 and is now ready to embark on a new life. There will be more to come as Virgin regroups and establishes a new strategy for New Zealand markets.

Air New Zealand’s adjustments and why New Zealand airports and travellers can look forward to some new opportunities.

Source: CAPA – Centre for Aviation and OAG

Click here to read Part 1.