Fare rise tipped as Pacific Blue exits

Pacific Blue said yesterday it was axing its domestic operations. Photo / Glenn Jeffrey

Domestic airfares are likely to increase because of Pacific Blue's departure from New Zealand and despite rival Jetstar's expansion plans, Consumer New Zealand warns.

Pacific Blue said yesterday that it was axing its domestic operations here while bumping up its transtasman flights by five a week.

Consumer New Zealand chief executive Sue Chetwin said the news was disappointing and warned travellers to book far in advance to ensure they got the cheapest tickets possible.

"It goes to show how difficult it is to run two domestic airlines and run them profitably. It's not good news for consumers. It will mean they can probably expect some fees to go up, although there will be some competition on routes. It will mean there is less urgency for Air New Zealand to have deals on those routes when there is not much competition."

Ms Chetwin said it would be interesting to see how successful Air New Zealand's Starfish card would be now there was one less player in the market.

Air New Zealand launched the card last month to offer frequent flyers on regional routes cheaper fares. The card is in a trial phase.

Air New Zealand domestic airline general manager Bruce Parton said Pacific Blue's move was not a surprise as the market could not sustain three airlines.

Mr Parton said Pacific Blue's departure would not increase prices, and if the market demanded additional flights, Air New Zealand would look to increase capacity.

After Pacific Blue's announcement, rival airline Jetstar said it would increase its domestic fleet from three jets to five by this time next year.

These two jets would replace the two the market is losing.

Virgin Blue chief executive John Borghetti said the airline had tried very hard but had failed to make a profit out of New Zealand's domestic market.

"We've been here three years and during that time we have lost a significant amount of money. There is virtually no prospect at all of that turning into profit. Unfortunately, we have had to make a tough decision of pulling out.

"That said we are very proud that we did bring a lot of competition into New Zealand, and we have basically laid the foundation to very competitive fares," Mr Borghetti said.

The company said yesterday that travellers booked on flights from October 18 onward would be provided with re-accommodation and refund options.

Jetstar chief executive Bruce Buchanan is adamant prices will remain low and that there is room for further expansion for the company.

The company's first new jet will join the domestic market in December and the second will enter the market within the next 12 months.

Buchanan said he was very pleased with the company's performance in New Zealand over the past 14 months. Jetstar started flying domestically in June 2009.

"We will continue to deliver low prices. Our focus is on delivering low fares, making airline travel more affordable and accessible."

The Engineering, Printing and Manufacturing Union said Pacific Blue's move from the domestic market could cut up to 200 jobs, despite the airline saying there would be no redundancies and that up to 100 new jobs would be created through increased Tasman flights.

However, national secretary Andrew Little said Pacific Blue was dependent on a number of other service providers and suppliers who would have to scale back their work.

"Once again, a large number of Kiwi workers will pay the price of proving that our domestic aviation market cannot sustain three airlines on the main routes."