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Air NZ, Virgin Blue agree to seek regulatory clearance for trans-Tasman accord

Monday 3rd May 2010

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Air New Zealand and rival Virgin Blue have agreed to seek regulatory approval for an alliance on trans-Tasman routes that would offer lower fares, code sharing and reciprocity on loyalty scheme and airline lounges. 

The tie-up is a response to Qantas Airway’s two-airline strategy, where its low-fare Jetstar unit operates domestically in New Zealand linking to longer-haul flights of the parent. Routes across the Tasman are served by a host of airlines, including Emirates, which can cost-effectively extends long-haul flights to Australia with a short hop across to Auckland. 

“The proposed alliance will allow the airlines to strengthen their competitive offering on the trans-Tasman and to collaborate on future route and product planning, code sharing and frequent flyer programme benefits,” the airlines said in a joint statement.

The deal doesn’t signal that either airline is looking to take a stake in the other, they said. 

The airlines will seek approval from the Australian Competition & Consumer Commission, New Zealand’s Commerce Commission and Ministry of Transport. Regulators are expected to take about six months to review the applications.  

The proposed alliance will connect regional centres in Australia and New Zealand as part of a trans-Tasman journey and won’t include domestic-only travel in either country. They said it also won’t impact on the airlines’ existing partnerships and alliances. 

Air New Zealand was unchanged at $1.36 on the NZX today. Virgin Blue last traded on the ASX at 59 Australian cents. Virgin Blue is scaling up its own operations, announcing a month ago that it has signed an agreement with Boeing Co. to buy up to 105 new 737 aircraft, mainly to replace existing narrow body planes. 

An alliance has been a fall-back option for Air New Zealand previously, and it has unsuccessfully negotiated with Qantas about a tie-up in previous years. Its monthly data, released last week, showed the number of passengers carried on the Tasman and Pacific Island routes fell 1.6% in March, to be 3.2% down in the year to date. 

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