Virgin Blue and Air New Zealand to Form Alliance

Virgin Blue and Air New Zealand are seeking regulatory approval to create an alliance on the Trans Tasman. The proposed alliance will allow the airlines to strengthen their competitive offering on the trans-Tasman route and to collaborate on future route and product planning, codesharing and frequent flyer program benefits.

The two airlines have had trans-Tasman teams working on the alliance proposal for some months and will today (Monday, 3 April 2010) file applications with the Australian Competition and Consumer Commission and the New Zealand Ministry of Transport. The regulators are expected to take around six months to review the applications prior to authorisation.

The proposed alliance will connect regional centres in Australia and New Zealand but only as part of a Tasman journey and does not include domestic-only travel in either Australia or New Zealand. The agreement is also not a signal of intention by Air New Zealand or Virgin Blue to take a shareholding in the other.

 “Our alliance is about working closely together to give customers cheaper fares, increased frequency and better connections, while delivering improved returns,” said Air New Zealand Chief Executive Officer, Rob Fyfe. “Simple moves like integrating schedules and capacity, allowing customers to book multi-sector journeys on one code, providing reciprocal loyalty scheme benefits and reciprocal lounge access for qualifying customers will be a compelling proposition for leisure and business travellers on both sides of the Tasman.”

Mr Fyfe also said that the number of seats flown on the Tasman by the alliance carriers would grow more quickly than they would without the alliance.

“By combining our New Zealand customer base with the strong market presence that Virgin Blue has in Australia, additional flights and new routes will make sense much more quickly. Also, the ability to offer Air New Zealand codeshare flights to domestic destinations in Australia, and Virgin Blue codeshare flights to regional destinations in New Zealand as part of connecting Tasman journeys will be a great benefit to our frequent flyers and a boost for tourism in both countries,” Mr Fyfe said.

The proposed agreement will have four key components:

1. A broad free-sale codeshare arrangement covering:
• All Tasman sectors currently operated by either airline
• Domestic Australian sectors as part of a connecting Tasman journey
• Domestic New Zealand sectors as part of a connecting Tasman journey

2. A revenue allocation agreement under which:
• Revenue generated across all Tasman sectors currently operated by either airline, or which may be developed under the agreement, will be allocated between the two carriers, and;
• A joint trans-Tasman Network Planning & Revenue Management Team representing both airlines will oversee the Tasman operation

3. A frequent flyer co-operation agreement that will provide reciprocal loyalty scheme benefits to members of Air New Zealand’s Airpoints loyalty programme and Virgin Blue’s Velocity Rewards programme.

4. A lounge co-operation agreement that will ensure lounge access to qualifying guests of either airline.

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