Qantas matches Air New Zealand fares to keep grip on NZ market

By NZPA

Tuesday 20th August 2002

Qantas has matched Air New Zealand's new cheap domestic air fares in the strongest indication yet it is prepared to fight to increase its slice of market.

Yesterday Qantas effectively liquidated Air NZ's price advantage, matching the airline's recently announced cheapest fares, effective from November 1.

That cuts its lowest fares to $59 one-way between Auckland and Wellington, and $69 between Auckland and Christchurch, excluding $9.80 in insurance and other levies payable by passengers on both airlines.

The cheapest fare now available to Wellington is $89 before levies, with most Qantas passengers flying at short notice having to pay $275 in economy class.

Qantas is currently maintaining its in-flight service, although that is under review. The airline did not indicate how many seats would be available under these deals.

Qantas general manager for New Zealand, Peter Collins, said the flying kangaroo had fought back because it did not want to lose market share this side of the Tasman.

Air NZ has about 78 percent of the domestic market, leaving Qantas with about 22 percent.

"We've been operating in New Zealand for over 60 years, and we operate over 110 flights a week across the Tasman. Plus we have daily services to the US and three flights a week to South America from New Zealand so it's a vitally important network market for us," Mr Collins told National Radio today.

Qantas is planning to lease three extra aircraft to boost capacity from the four it already flies between Auckland, Wellington and Christchurch. The airline has hinted it will also look at services outside the main routes.

A senior consultant with Sydney-based Centre for Asia-Pacific Aviation, Ian Thomas, said the Qantas fare announcement was good news for travellers but questioned how long the low prices could be sustained by both airlines.

He said Qantas had a much larger domestic home-base from which to "cross-subsidise" fares into the New Zealand market, but such low prices could prove destructive to both airlines.

Although the cheapest fares from Auckland to Wellington and Christchurch are available only through the Internet, the Travel Agents Association has welcomed an indication from Qantas that agents with an approved booking "engine" will receive commissions for selling these.

The association is furious that Air NZ is charging passengers an extra $10 for each domestic flight sector if they do not book their own trips on the Internet, but association president James Langton said the Qantas fares announcement was great news for the public.

The Qantas announcement yesterday upstaged Air NZ's new airpoints programme, which excludes the cheapest flights from frequent flier rewards.

Qantas' cheap fares are eligible for airpoints.

Under Air NZ's new programme, a customer will need to take 10 full economy-class flights from Auckland to Wellington to earn reward travel, compared with 13-16 trips currently.

A customer flying from Christchurch to Wellington will need to take 10 journeys, against eight to 16 at present.

Reward flights will become more difficult to earn on some international routes, however, with a New Zealand to London traveller needing to take that trip five times to earn a free flight, versus four under the current scheme.

Other popular routes like New Zealand to Sydney and New Zealand to Los Angeles were unchanged at seven and five trips respectively.

Air NZ said 83 percent of its customers would receive benefits.

Chief operating officer Andrew Miller said his airline would not be goaded by Qantas into a rethink.

He said that most passengers on fares qualifying for airpoints would need to take fewer flights to accrue enough for a bonus trip, and the airline was setting aside an average of 15 percent of all seats across its network for people cashing in their points.

Air NZ said its reward system was superior to Qantas because it awarded points according to kilometres flown, rather than miles.

Consumers' Institute chief executive David Russell said while some travellers would lose out, overall he was impressed with the new scheme.

"If you want to travel from Auckland to Invercargill you are going to do quite well."

Such a trip would previously have burned up 30,000 air points, the same amount as a trip to Sydney.

"One of the things I like about it is the simplicity of the scheme. At least they are being transparent."

Both airlines are about to announce annual results, with Air New Zealand expected to post a small operating profit next week.

Tomorrow Qantas is expected to unveil an increase in second-half profit of more than 76 percent after the collapse of its main rival, Ansett, ended a price-cutting campaign in Australia.

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