Fears Air NZ deal will increase Transtasman fares

Air New Zealand's plans to code-share with Qantas on the trans-Tasman route has provoked concern from travel agents.

Air NZ and Qantas announced last night they had signed a code share agreement for their trans-Tasman routes and were set to apply for clearance for the deal.

The trans-Tasman route is one of the most competitive in the world, with eight airlines competing in the space.

A Flight Centre spokesman told Radio New Zealand this morning it was concerned the deal could jeopardise the low fares on the route and reduce the number of seats available on some trans-Tasman flights.

House of Travel's retail director Brent Thomas was worried about the effect on competition in the long term.

"The airlines have indicated that there's still going to be significant capacity from both of them for the consumer," he said.

"House of Travel's concern is while that may be the initial offering from both Qantas and Air New Zealand, what is their long term strategy and do they see that there is going to be further rationalisation and therefore less capacity."

The Wellington Regional Chamber of Commerce (WRCC) spoke out against the proposal last night, fearing it could be bad for Wellington.

WRCCC chief executive Charles Finny said he would be writing to the Minister of Transport to ask that the proposal be scrutinised by the Commerce Commission.

He said a code sharing arrangement would be bad for Wellington, as there was virtually no competition to Air New Zealand and Qantas between Wellington and Australia.

"A code-share deal which included Wellington would risk higher fares, fewer flights and lower airfreight capacity for our regional economy. The Wellington business community will be concerned about such possibilities." Mr Finny said.

The airlines said in a joint statement they would seek clearance from New Zealand's Transport Minister and the Australian Competition and Consumer Commission.

The agreement is also subject to an independent audit review.

Air New Zealand chief executive Rob Fyfe said the clearance applications could take around six months to be assessed.

He said the value of the benefits the airlines would reap from the codeshare would not be released for commercial reasons.

The airlines had a code-sharing agreement on the Tasman route in the 1990s, which ended acrimoniously in 1997.

The airlines' last attempt to tie-up their operations was rejected by competition watchdogs in 2003. That deal involved cooperation on all international and domestic services.

Mr Fyfe said the new code-sharing arrangement would only apply to the trans-Tasman route, and not other international routes, or domestic markets.

He said the competitive nature of the Transtasman route meant the number of seats on sale was greater than the number of passengers carries, He said it equated to 11 empty A320 aircrafts making two return trips a day.

"To continue such over capacity in the present environment of high fuel prices would not only be uneconomic, it would be financially and environmentally irresponsible," he said.

Air New Zealand's fuel consumption would fall by about 100,000 barrels a year. The airline uses about 1.78 million barrels a year on the trans-Tasman route.

Air New Zealand would remove two aircraft from its Transtasman fleet, while Qantas would remove one.

- NZPA