I am a fan of AirNZ.  I blog about AirNZ heaps, and 99% of the time it’s positive, if not downright glowing, feedback (just see my last post as an example!).  But I think they got it wrong this time, and BIG TIME.  Plus, I think there is something more to it – and it’s not about the trans-tasman route.

Anyway I read in the news when I was in Sydney on Monday that AIrNZ proposes an alliance with Virgin-Blue on the trans-tasman. In fact if I was more precise I would say AirNZ are going to seek regulatory approval for an alliance.  And there is a subtle, but important, difference as this article points out (ie it needs approval to go ahead).

Anyway, I think its mostly a bad idea and here’s why:

Summary Table: How it effects everyone, pros/cons and who wins (if anyone).


Issue/Result For AIrNZ Customers For Virgin Blue Customers For AIrNZ (the Airline) For Virgin Blue (the Airline)

Single booking NZ to OZ and onto another OZ destination

Handy

(but uncommon)

None (since it doesn’t connect with Pacific Blue in NZ).

Hardly any Virgin Blue customers will be NZ based.

Useful for marketing, and means finally NZ has ability to onward connect within Australia. Good.  Means AirNZ customers end up using Virgin more in the OZ leg.  Increases yield in OZ.

Single Booking OZ to NZ and onto another NZ destination

None (see up a cell and right one cell)

Handy.

(but slightly more common than the reverse combination)

Good.  Means Virgin customers end up doing NZ flights on AIrNZ not Pacific Blue (ie higher yield).  Also more or less stops Pacific Blue expanding into too many regional centers (as they would end up competing with their own co-share flights) Not sure here.  If we count Virgin Blue and Pacific Blue together I think its a BAD idea.  They lose all the connections in NZ to their sister airline (presume you could book thru Virgin Blue to Pacific Blue at present?).  They only gain on the smaller regional routes, but that would be WAY less common (and hence less valuable).
Frequency of flights

Depends.

If you don’t care what airline you fly on, overall might be better frequency of flights (ie good).

If you DO care what airline you fly on their will be less flights per airline (ie BAD) – see note 1

Either way there will be less competition.  This is BAD for us all (regardless of what AirNZ says).

Quite good actually.  Strengthens their position by being able to drop some flights but keep a full (even enhanced) schedule. As per AirNZ but even better (since Virgin have less flights at present, they will in effect increase their schedule more).
Price

Short term – nothing will change

Long term – reduced competition is never good for price.

See note 2

Good.  Lower flights, higher yield, and eventuality all this at a higher price too!
Effect on JetStar (and Qantas) I think Qantas execs are thinking “Oh, shit”.  Jetstar is thinking … no wait, Jetstar doesn’t think :-)

Notes:

1) This is a BIGGIE for many.  I CHOOSE to fly AirNZ.  I choose to do this for a number of reasons, mostly because they actually do a better job than other airlines on a whole bunch of fronts.  So why would I CHOOSE to fly Pacific Blue when I could fly AirNZ?  I wouldn’t.  Not at a similar price point at least  (and AirNZ have proven consistently they will compete on price when needed).    So for me flights go DOWN.  Sure I could choose a Virgin Blue co-share flight, but I can get 99% of that now by just booking direct with Virgin.  In fact I can get 99% of that by booking with whatever airline I want.  Sure I don’t get airpoints, or lounge access, but if that was important to me I would have booked AirNZ anyway.

2) I just don’t believe AIrNZ when they say it will result in lower prices. There is a Tui’s ad in there somewhere.  I can’t think of one single case where this has happened.

I think blogger Lance Wiggs summed it just nicely with his paragraph in his recent post:

So please Air New Zealand focus instead on out-competing Virgin Blue, and beat them in on the web, in the airfields, and with ever growing strength and confidence in the air.

And never surrender to code sharing on your most important local routes.

Black and White Version: AirNZ/Virgin Blue alliance is (overall) bad for the consumer, but partly-good for Airlines is still bad.  Plus AIrNZ can beat any airline in its own backyard, so why?

Update: The more I think about it, the more this just doesn’t add up. On the surface this is a WAY bigger win for Virgin than it is for AirNZ.  That’s because I would estimate 99% of AirNZ customers flights to OZ are to a major city (so they don’t need regional connections in OZ).  NZ is more tourist based, so I figure this number may be a tad lower BUT still 90%+.  So why do it?   I think there is more to it than just fixing up the trans-tasman. This is about stopping competition internally in NZ.  With this deal there is now little incentive for Pacific Blue to expand to regional routes.  I think that’s the real driver here.  I HOPE that the Commerce Comission in NZ looks at this VERY closely.

Post to Twitter Post to Delicious Post to Facebook Post to StumbleUpon