Fears of trans-tasman 'bloodbath'
19 July 2008
Roeland van den Bergh
Air New Zealand says the trans-Tasman market is on the cusp of returning to a bloodbath as a number of airlines look to enter the route or add more capacity.
Air NZ head of short haul airlines Bruce Parton said profits on the Tasman were again under pressure from sustained record fuel costs just over a year after services were restructured to stem heavy losses on the route.
Air NZ and Qantas tried to merge their trans-Tasman businesses in 2006 to save costs and make the route profitable. But the deal was rejected by consumer watchdogs as too anti-competitive.
Air NZ responded by cutting capacity between New Zealand and Australia by 11 per cent in April and November last year. That, along with service changes, resulted in the route making a profit in line with the rest of the network last year.
Airlines have increased Tasman fares several times this year.
Airlines are finding new ways to increase revenue, including in some cases charging for bags.
"We have seen fuel nearly double the price it was in November and we are unable to pass on all of these price increases to customers," Parton said.
Passenger demand was holding up, but there was no growth in volume, he said.
In its May figures Air NZ reported year-to-date passenger numbers were flat and seat numbers were down 2.6 per cent, resulting in planes flying fuller.
Now some carriers appeared to be planning to add significant capacity or taking up rights to extend existing services to Australia to include a return trip to New Zealand, Parton said.
Profitability on the Tasman would deteriorate quickly if capacity growth outstripped demand. "Put simply, the Tasman market is on the cusp of turning into another bloodbath," Parton said.
House of Travel retail director Brent Thomas said the Tasman could become more popular with New Zealand and Australian holiday makers as the cost of trips to Europe and Asia become more expensive.
Trans-Tasman sales were up nearly 28 per cent in the last two years.
Pacific Blue and Emirates also had a growing share of the market.
Among the airlines tipped to take advantage of any growth in the market was Virgin Blue's new trans-Pacific offshoot V-Australia which could deploy some of its Boeing 777-300s on the Tasman when it begins services later this year.
© 2008 Fairfax New Zealand Limited. All Rights Reserved.
The Dominion Post
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