V Australia tie-up raises the stakes

The closer relationship between Emirates and V Australia turns up competition across the Pacific for New Zealand travellers.

The two airlines will, from next month, run code-share flights across the Tasman on Emirates aircraft from Auckland and Christchurch. Those flights will connect directly with Virgin Blue's V Australia services that run from Sydney to Los Angeles, with transit times down to as little as 60 minutes.

The airlines are promoting their premium cabins and low lead-in fares.

While there is scepticism about how attractive a flight to Los Angeles via Sydney is - flight time alone is increased to 17 to 18 hours as opposed to 12 to 13 hours - rival airlines will be eyeing the tie-up closely.

Promotional return economy fares start at $1154, $500 less than the next cheapest available on the House of Travel website (on United, also via Sydney) and $1200 less than standard fares on Air New Zealand's website for travel in November, although those flights are direct from Auckland to Los Angeles.

Air New Zealand did not want to comment on the Emirates-V Australia deal, but it is already fighting what it calls "collusion" between the V and Delta, which want to share revenue on flights across the Pacific.

Air New Zealand has taken its case to the Australian Competition and Consumer Commission on the Delta joint venture that would involve co-ordinating schedules, marketing and prices.

While the V Australia-Emirates deal is well short of that, it does give the Dubai-based carrier a de facto footprint across the Pacific out of Australasia and V Australia a presence on the Tasman.

Goldman Sachs JBWere head of research Marcus Curley said the effect on competition was modest.

"The important thing is to put it into perspective, in terms of the number of seats for New Zealanders on Emirates flights to Sydney and on to the US. It is a small amount of capacity compared to the broader market."

More important was whether reports of a pickup in air travel translated into increased yields, which would have a greater impact for all airlines in the area.

International Air Transport Association figures out last week show the premium travel - crucial for airline profitability - appears to have bottomed out. In the south-west Pacific it grew 29 per cent between July last year and the same month this year although this would have been distorted by the entry of V Australia in February.

The airline's executive general manager, Scott Swift, said that since it launched there had been "fantastic" interest from New Zealand despite connections not being tailored to fit the Sydney-LA flight.

He expected even stronger interest now connection times were more seamless.

Virgin's New Zealand offshoot Pacific Blue flies across the Tasman and within the travel industry there have been questions about why there was not a closer tie-up with V Australia.

Swift said the code share with Emirates would not cannibalise Pacific Blue as most of its services were to Brisbane, not Sydney.

Flight Centre product general manager Andrew Stark said better deals on direct Auckland-Los Angeles flights - such as a business class seat for the price of a Qantas premium economy fare - would be more attractive. "The price point has got to be really good. People want the shortest, quickest route to their destination."