Virgin Australia and Air New Zealand announced a new business alliance that would improve both carriers outlook for passengers transportation services between Australia and New Zealand. The new alliance will bring deeper code sharing agreements easing travelers connections on routes operated across the two carriers in the newly expanded network. Such travelers will benefit from unrestricted access to any one carrier’s lounge. Cross-honoring Air New Zealand’s Airpoints loyalty programme and Virgin Australia’s Velocity Rewards programme will further stimulate market share gains for the two participants. In the end both carriers are to share profits.
A profound alteration of flight services schedules will reflect the nature of a deal aimed at providing additional convenience to travelers, market share consolidation, flexible adjustment to seasonal demand and a somewhat limited attempt to streamline flight operation for cost reduction.
Integrating two networks.
The new agreement will permit joint operation between two carriers with already dense networks that currently integrate 26 and 31 destinations, respectively for Air New Zealand and Virgin Australia Blue Flight domestically and across the Tasman Sea.
The schedules re-adjustments that will take place will nonetheless restrain both carrier to capacity levels below limits stipulated by regulating agencies like the Australian Competition and Consumer Commission (ACCC) and New Zealand Ministry of Transport (MOT).
Improving flight convenience for air travelers, the main driver behind the deal as a mean to improve overall market share will be achieved through the following:
Double daily services have been put in place between Christchurch and Sydney, Christchurch and Melbourne and Brisbane and Christchurch where the two airlines will equally share four daily flights. Travelers are offered more flights opportunities at much improved departure times in the morning and afternoon/evening.
The Queenstown-Sydney flights are now set to operate at least five days a week. The Wellington to Sydney route will be solely operated by Air New Zealand twice daily again with conveniently scheduled departures in the morning and afternoon/evening.
Routes that were previously operated by both airlines have been restricted to one airline operation wherever expedient. This measure consolidates a carrier on routes where it already enjoy a higher market share allowing the other carrier to cut operational cost and streamline flight operations while still enjoying sizable profit. To date Air New Zealand maintains a market capacity share of 70% against Virgin Australia Pacific Blue 30%. To that end Virgin Pacific Blue will assume all flight services between Brisbane and Wellington, Sydney and Dunedin as well as between Melbourne and Dunedin. In addition the carrier will operate the two daily services between Brisbane and Wellington in the morning and afternoon/evening. Air New Zealand will be left to conduct all the group’s flight operations on the Wellington-Sydney and Auckland-Cairns routes.
This latest alliance incorporates anti-competition provisions that stipulate capacity thresholds under which the joint venture is mandated to operate. Accordingly, capacity on Air New Zealand’s Auckland to Adelaide services will increase by 16% and
Auckland-Perth flight services will increase in frequency to eight times per week adding another 4% capacity to the route. Overall capacity into and out of Wellington will also grow by 3.5% in average, thanks to a marked increase of 10.5% on the Melbourne direction and another 5% increment to Brisbane services being counter-weighted by a 14% drop on the Christchurch route.