Qantas Group is now the biggest airline operator on the Tasman, the 2200km stretch of water that has at times been one of the most competitive sectors in the world.
Qantas and low-cost subsidiary Jetstar have 44 per cent of the market, just ahead of Air New Zealand with 43 per cent. A long way back is Virgin Australia on 4 per cent, according to a codeshare application to regulators on both sides of the Tasman.
Air NZ and Virgin Australia want a codeshare that would give Virgin passengers access to the Kiwi carrier’s planes (excluding those to Queenstown) and its seven international lounges on each side of the Tasman.
To support their case for getting closer, the airlines’ application stresses the level of competition over the Tasman, which has been described as a bloodbath by airlines at times when prices were driven down by high capacity.
Prices soared following the resumption of travel after the pandemic. While the rate of increase has moderated, the cost of a ticket is still well above the lows of just $69 one-way trips between Auckland and Melbourne when Air NZ was desperate to stimulate demand as Covid-19 first impacted the travel sector in late February 2020.
The transtasman sector operates as a Single Aviation Market, with designated Australian and New Zealand airlines able to offer unlimited capacities and frequencies and having no restrictions on the routes they can operate to, within or beyond the two countries.
Accordingly, any designated Australian or New Zealand airline (Air NZ, Virgin Australia, Qantas and Jetstar) may enter or expand on transtasman routes, says the application to New Zealand’s Ministry of Transport and the Australian Competition and Consumer Commission.
Carriers’ scheduling and frequency decisions on transtasman routes are driven by broader network considerations, and airlines can lose money on that sector of their flights.
Given the connections between Australia and New Zealand for onward international travel, so-called “fifth freedom” carriers are able to service the transtasman at marginal cost.
“As a result, a transtasman route does not need to be profitable on a stand-alone fully costed basis for a fifth freedom carrier. This further increases the intensity of fare and service competition. Fifth-freedom carriers are an established feature in the Tasman market, with the following airlines currently providing transtasman services: Emirates, Latam, China Airlines, China Eastern, AirAsia X and Batik Air Malaysia.”
While Qantas, Jetstar and Air NZ are the key carriers across the Tasman, international operators also service the route:
- This month, China Eastern started services between Hangzhou, Sydney and Auckland, operating four times a week.
- In August, Batik Air Malaysia began a service between Auckland and Perth, operating six times a week.
- In March this year, Emirates restarted daily services between Sydney and Christchurch.
- In March, Latam recommenced services between Sydney, Auckland and Santiago.
- In October 2022, China Airlines restarted services between Auckland, Brisbane and Taipei, operating five times a week.
- In November 2022, AirAsia X recommenced services between Kuala Lumpur, Sydney and Auckland. AirAsia X has increased their market share compared to their pre-pandemic level (and from next year will fly via the Gold Coast).
These carriers generally operate larger aircraft suited to long-haul flights, as such aircraft are usually used to operate between their hubs and Australia.
Emirates’ services are operated by an Airbus A380, which is the largest of all passenger aircraft types and is used by only a handful of carriers globally.
“Given the large number of seats on these aircraft, these operators have a strong incentive to offer competitive airfares to increase load factors,” the application states.
If approved, the Air New Zealand-Virgin Australia proposal will restore links between the airlines which were severed when a once-close relationship broke down in 2018.
Grant Bradley has been working at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.