Pacific Blue thinks small to plot bigger network

Adrian Hamilton-Manns. Photo / Supplied

Pacific Blue is looking at expanding its network of domestic destinations using smaller aircraft than it uses on its main trunk routes.

The airline has brought a 104-seat Embraer aircraft painted in its livery on a tour of the country while assessing the viability of regional routes and flying from cities such as Hamilton and Palmerston North across the Tasman.

A move to service regional cities would pit Pacific Blue against Air New Zealand which has a stranglehold in the regions.

It would also give Pacific Blue additional business to the main trunk, where competition is set to hot up from June with the arrival of another low-cost carrier, Jetstar, which will replace Qantas.

Pacific Blue started flying domestic routes in 2007 and now flies its 180-seat Boeing 737-800s between the four main centres.

The airline's general manager for commercial, Adrian Hamilton-Manns, said routes such as Rotorua-Wellington, Auckland-Nelson and Auckland Palmerston North were being assessed as were some in the South Island.

"We need to start seriously on which markets will work - we've just got to be certain there's a good business case given the economic climate.

"As far as fares go we haven't worked out what is sustainable. When you look at some of the [regional] fares that are around they're eye-watering."

Hamilton-Manns said fares had dropped by 35 per cent on routes where there was direct competition since Pacific Blue entered the domestic market.

Air New Zealand had scaled back flying from Hamilton and Palmerston North in the past year and that presented opportunities, he said.

Pacific Blue's Australian parent, Virgin Blue, is expected to go from an after-tax profit of A$141 million ($180 million) last year to a loss of A$5 million this year.

Hamilton-Manns said the New Zealand operation was "barrelling ahead" and new routes would not come at the expense of scaling back on the main trunk between Auckland and Dunedin.

"We're retaining those, what it does do is allow greater flexibility. We could do all sorts of things that are sustainable for a 100 seat plane but not for a larger 737 that we have."

The twin-engined Embraer 190 E-Jet has a two-two configuration with leather seats.

The aircraft was at Wellington Airport yesterday. The airport's chief executive, Steven Fitzgerald, welcomed the prospect of greater competition from the capital.

"Competition brings down fares and stimulates travel, with huge benefits for regional tourism and business. This aircraft opens up the potential for routes such as Wellington to Dunedin, Invercargill, Queenstown and Hamilton to enjoy explosive growth," he said.

The company found that following Pacific Blue's arrival on the main trunk in November 2007, travel to Auckland and Christchurch increased by up to 30 per cent.