star

Air NZ said it would end its 7-year alliance with Virgin Australia, meaning the airlines will now compete head-to-head for passengers in the hotly competitive route between the two countries. Under the alliance, the pair had coordinated their route network, flight schedules and pricing, but when the deal expires in October they will be free to pursue different strategies for the Australia-New Zealand sector, where more than 10m seats are offered annually by airlines flying the route. Air NZ shares rose 4% and Virgin Australia shares fell by as much on the news. Virgin Australia CE John Borghetti said that following the end of the alliance, his airline might deploy its low-cost arm Tigerair Australia on flights between Australia and New Zealand for the first time. <br/>

Smaller airlines are in the wings ready to swoop if Air NZ ditches more regional routes, and the carrier is getting the hard word to help third tier operators that step up when it bows out. Chathams Air has already expressed an interest in taking over the Kapiti to Auckland service from Air NZ which ended Tuesday. Sounds Air and Barrier Air both are eager to expand further but were tight lipped about the destinations they were eyeing up. Having already taken on services between Wellington, Westport and Taupo, and between Blenheim and Christchurch, Sounds Air CE Andrew Crawford said they were looking at what other routes Air NZ could pull out of. Aviation consultant Irene King believes Air NZ may reconsider its Auckland Whangarei service during the day, and said it could opt to pull out altogether. <br/>