Air NZ and Qantas hunker down for domestic scrum

Friday 20th July 2001

Peter Collins

By Graeme Kennedy

Air New Zealand and newcomer Qantas Airways are getting down to business in the new-look domestic market, hustling for corporate and leisure traffic, matching the widest range of fares ever seen - and both claiming strong support.

The national carrier had a near-monopoly in the weeks after Tasman Pacific, franchised as Qantas New Zealand, collapsed on April 21 as the Australian airline moved in with a 767, then 737s to help shift stranded passengers around the country.

But its near-100% capacity share has been whittled to around 70% with Qantas now operating four 737s on 18 daily flights on the Auckland-Wellington and Auckland-Christchurch routes. Qantas also code-shares other services with Origin Pacific.

And, says Qantas New Zealand regional manager Peter Collins, the fleet size could be increased if future growth demanded it.

"We were initially here to pick up stranded passengers but we made the decision to stay long-term and offer a range of fares to match all those on the market, including Freedom's," Mr Collins said.

"Those fares opened a new market with first-time flyers, but we are also serving travellers coming to us after the Tasman Pacific collapse.

"Tasman Pacific had about a 30% market share and we are now getting the passengers, gradually building the business to be sustainable and long-term.

"We are talking to the corporates and have to show them we are offering a competitive product with viable trunk capacity feeding into 200 transtasman flights a week that tap into our broader international network - and we are making headway."

Mr Collins said although there was still some public confusion about Qantas and its failed franchisee, that would dissipate over time.

Meanwhile, the carrier was taking a joint approach to work through the industry by taking its offerings to the market with branding and advertising, going directly to the trade through travel agents and talking with the corporates.

Qantas' main purpose in operating here is to maintain the vital traffic feed to its network previously supplied through commercial arrangements with Qantas New Zealand and, before that, Ansett New Zealand.

"We see real opportunities here with capacity around 30% to 40%," Mr Collins said. "We are delighted with the progress we have made in such a short time - there is support for us out there and we expect to do good business in New Zealand."

Air New Zealand sales and marketing vice-president Paul Donovan said his carrier had introduced more capacity and a wider range of fares, particularly with its low-cost subsidiary Freedom's entry to the domestic market on May 1, before any competitive pressure from Qantas.

"We put Freedom on the trunks because it was critical to show how serious we were about providing low-cost fares and to ensure Air New Zealand was providing the whole range," Mr Donovan said.

"The moves by Virgin Blue to enter the market had no particular influence on our decision - we were focusing on what we had to do to keep New Zealand moving after the Qantas New Zealand collapse.

"There was a fear that without competition Air New Zealand would gouge people, a perception that there would be few seats and they would be too expensive but there are ample seats and prices have either come down or not changed.

"After the collapse, Air New Zealand went to the corporates and offered support rather than squeeze the business as a monopoly.

"The corporate sector appreciated that approach, the way we conducted ourselves in a monopolistic situation."

With strong domestic competition now being provided by Qantas, Virgin Blue's efforts to enter the relatively small New Zealand market by the end of the year appear overly ambitious.

The Australian-based carrier's prime target is the Tasman but the chances of securing those rights for the UK-owned company are seen in the industry as extremely low and requiring special approvals from both the New Zealand and Australian governments.

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