A brief notice that is now on the ministry website says the Associate Minister of Transport (Matt Doocey) had “authorised a commercial framework agreement, codeshare agreement, and various related agreements between Air New Zealand and Virgin Australia for a period of five years”.
The NZ Airports Association had made a detailed submission raising concerns about the proposal. Moore said she was surprised to learn of the news through the media.
As a submitter, she had expected to be notified in advance of the deal being approved. The ministry said on Monday that there had been a delay in updating its website last Friday and it would release analysis and advice on the decision “in due course”.
“Airports usually are mildly supportive of these kinds of co-operation agreements but we have been concerned for some time that there has been no government monitoring of the stated consumer benefits.”
Airports were strongly against this codeshare proposal which it says benefits only a small number of Virgin customers, mainly its business and Velocity frequent flyers.
The airline had about 20% of transtasman market share in 2019 but collapsed into administration when the pandemic hit. It has since rebuilt much of its network, with an emphasis on the lucrative Australian domestic market. But it hasn’t restarted most of its transtasman network where it had been a lower fare option and now only flies into Queenstown.
In its submission on the proposal, the association said airfares across the Tasman were 74% up on pre-Covid levels.
“This data indicates the market requires extra capacity which this application does not require and will in fact act as a disincentive to being added.”
Air NZ and the Qantas Group (and joint venture partner Emirates) this year had 90% of capacity, “a significant concentration of power in a two-airline duopoly”, the submission said.
Moore told the Herald: “We will be eagerly awaiting the release of the Government’s decision-making materials to understand why they thought this was a good thing for New Zealanders”.
“In the meantime it is making us seriously question if the Ministry of Transport evaluation process for these proposals has any real purpose if such a weak proposal for New Zealand still gets ticked through.”
Doocey said feedback was carefully considered, however analysis found that the codeshare agreement delivered benefits to New Zealand, over and above any potential detriments.
“The agreement reinforces New Zealand’s connections with Australia and provides more choice for passengers wanting to travel to New Zealand. Making it easier for transtasman travellers to access the sights and experiences of New Zealand helps boost the economy,“ the minister said.
In the original application, Air NZ and Virgin Australia played down the threat to more competition, saying the competitive dynamics of the Tasman market were characterised by many operators, and the availability of new entry and expansion due to the Open Skies agreement and fifth freedom rights available for international carriers.
“The proposed conduct does not change Virgin Australia’s incentives regarding entry onto the transtasman utilising its own aircraft and therefore does not have the effect of delaying or disincentivising entry that would otherwise occur.“
Virgin would continue to assess the commercial viability of transtasman services with or without the agreement.
“If circumstances change and it chooses to enter any other specific overlapping transtasman routes these will be carved out from the proposed conduct,“ the application said.
The deal would result in enhanced marketing of New Zealand as a tourism destination to Virgin Australia customers.
This was expected to result in “incremental” traffic with corresponding benefits for the New Zealand tourism sector.
Grant Bradley has been working at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.
