Free flight - the sky's the limit

New Zealand and Australia have opened their skies to unrestricted competition by each other's airlines. SCOTT MACLEOD assesses the impact for ordinary Kiwis.

It is 7.15 pm and the Qantas jumbo jet leaving Auckland Airport is full as it swings towards Los Angeles.

Flight QF25 is one of just 12 Boeing 747-loads of people Qantas is allowed to fly out of New Zealand each week.

But a historic agreement yesterday has changed that rule.

In future, New Zealanders should be able to choose from many more Qantas flights. The same goes for Air NZ. Where once the number of routes our national carrier could follow beyond Australia was restricted, it will be an open market. If there are travellers, airlines can fly them.

The Government expects we will pay much less to fly abroad and exporters will have their international freight costs slashed.

That is the vision behind the "open skies" deal signed yesterday. The historic transtasman air accord caps 10 years of often tetchy talks between Australia and New Zealand.

The most important change is the scrapping of the limit on how many people Australian airlines can fly out of New Zealand, and vice-versa. Until yesterday, that limit was the equivalent of 12 jumbo jets, but new "through-rights" mean Australian planes coming here can now pick up as many New Zealanders as they like before carrying on to a third country.

Our Government hopes that Qantas will fly more people out of New Zealand, sparking a price war with Air New Zealand that will cut fares on major routes. It also hopes that Asian travellers on Air NZ flights to Australia will carry on here.

But no one knows for sure what will happen. The reality is that the two airlines may simply continue with business as usual.

For now, the Government is crowing about the deal, which it calls a "historic" liberalisation of air travel.

Transport Minister Mark Gosche says 800,000 people fly the Tasman each year, and the deal will give them more options for travelling on to other countries. It will also boost business opportunities in Asia.

As for Qantas, Mr Gosche says it is already flying as many people out of New Zealand as it is allowed, which suggests it will carry even more with that restriction gone.

Tourism Minister Mark Burton is even more enthusiastic, saying the agreement has "enormous significance."

But Qantas refuses to even talk about the deal, let alone hint at any new plans it has for New Zealand. Australia-based spokeswoman Melissa Thompson says, "We really don't have a comment at all, no."

Air NZ is almost as guarded about its plans for Australia. Spokesman Alastair Carthew will say only that the deal "gives a more flexible environment" and "is something we will have to look at in future."

Whatever the airlines do - if anything - there is no doubt that the deal is a sudden and surprising breakthrough after 10 years of talk.

In fact, one of the past decade's biggest transtasman rifts was in 1994, when Australia scuttled a similar deal. Just days before the agreement was to be signed, Canberra stunned our negotiators by sending a fax to the Transport Minister Maurice Williamson saying the deal was off.

A fax may be a rude method of breaking an international deal, but in this case there were more important considerations. The snub dealt a blow to Air NZ's hopes of expanding in Australia, and the airline reacted angrily. It accused the Australians of trying to protect Qantas, which was about to enter a share float. It even bought Ansett in an effort to beat the restrictions.

So why the sudden breakthrough six years later?

Some industry pundits say it is because Qantas is now safe and Air NZ's Ansett buyout means there is little point in protecting the Australian industry.

Mr Gosche prefers to say the breakthrough stems from a new international mood towards freeing up the airways. The Australians have changed their minds after seeing many other nations enter open sky deals.

"It's been a long, hard haul to get the agreement with Australia," he says. "It's been a big step for them. This is historic and over a decade in the making."

Within the travel industry, players are guardedly optimistic.

Inbound Tour Operators Council president Don Gunn says Australia is growing into an important "hub" for Asian and Pacific travellers, and any opening of flights through there has to be good for our tourist industry. He hopes that Air NZ's new ability to fly through Australia will help kill seasonal bottlenecks that stop some Asians travelling here.

But the marketing manager for Flight Centre travel agents, Matt Freeman, says it is hard to predict whether competition will increase enough to push down airfares.

"We're still tied in with two big airlines. It may open up flights from smaller centres, but airfares are already competitive elsewhere. On the other hand, it can only benefit the consumer."

Thomas Cook travel agency spokesman Peter Hansen sums up a general feeling that if airlines do compete more ferociously on each other's turf, fares are likely to drop.

But the Government says travellers are not the only people to benefit. Exporters will, too.

Apart from that "through-rights" passenger clause, which the Weekend Herald revealed on Saturday, airlines are being given what are called "seventh freedom rights" on freight services.

Under those rights, Australian and New Zealand airlines will be allowed to fly freight directly from either nation to a third country. The point is that Qantas must still touch down in Australia at some point when flying New Zealand passengers overseas, but it will not have to do that with freight.

Mr Gosche says the clause will encourage Australian airlines to fly more freight out of New Zealand, giving our exporters more choice.

But exporters are less sure.

Trade NZ says the exporters most likely to use air freight are involved with perishables, clothes and high-tech goods. People in those industries say there are already plenty of air freight options and they can already choose up to 10 airlines or routes for some of their products. And Qantas already flies some freight from NZ on its through-flights anyway.

The Auckland-based fruit export manager for So-Fresh, Gordon Gibb, says he has seen several small freight airlines come and go. He is not sure whether there is enough room for a big airline to come in and offer more services.

"I don't think there will be anything dramatic happen."

NZ King Salmon chief executive Paul Steere says air freighters are starting to fill up because of our booming export sector, but existing airlines will adjust anyway and put on more flights. More flights by Australian airlines will make little difference.

"We're pleased with the open skies policy, but it's not a pot of gold at the end of the rainbow."

Whatever the reaction to the Australian agreement, we are certain to see similar deals with other countries in the next few months. New Zealand already has open skies with the Cook Islands, Samoa, Peru, Luxembourg, Malaysia and the United Arab Emirates. In the past two weeks we have also struck the world's first multilateral open skies deal - with the United States, Singapore, Brunei and Chile.

Mr Gosche says his negotiators are already talking to other countries in a bid to strike new deals, although he refuses to say which. However, one of the nations is "a major one."

Each of the one-on-one deals tends to have its own peculiar clauses.

For example, the Australian agreement means airlines no longer have to get Government approval for their fares and the two countries will recognise the other's air safety rules by December 2003. Australian and New Zealand airlines will have "unrestricted services across the Tasman and domestic services in both countries."

The deal has no effect on customs, immigration and quarantine restrictions, even though the 1994 talks raised the idea of passengers going through domestic rather than international terminals. However, that is a small sticking-point after 10 years of talks.

And although some of the players believe open skies will help fewer people than the Government is trying to make out, they all agree on one thing - only good can come of yesterday's deal.