Air NZ moves to block its rivals

By SCOTT MacLEOD transport reporter

Air New Zealand has launched a pre-emptive strike against cut-price competition, bringing in its own budget airline, Freedom Air, to fly between Auckland, Wellington and Christchurch from Tuesday.

Yesterday, Freedom Air announced it would double its fleet of Boeing 737s to four and sell fares between the three main centres up to 30 per cent cheaper than those available now.

The Weekend Herald has learned that, before this latest move, Air New Zealand had tried to keep its collapsed domestic rival, Qantas New Zealand, in business in its dying days.

It confirmed yesterday that it had agreed to give Qantas "significant relief" over the mounting debts owed for the leasing of eight planes owned by Air New Zealand subsidiary Ansett Holdings.

The Freedom Air move comes as Australian airlines Virgin Blue and Qantas Airways eye the gap left by the collapse of Qantas New Zealand.

Both airlines yesterday said they were undeterred by Freedom jumping in first.

Freedom's cheapest return fares will be $199 from Auckland to Christchurch, $159 Wellington to Auckland and $139 Christchurch to Wellington.

Air New Zealand's lowest return fares for those routes are $289, $219 and $169 respectively.

But Freedom will offer only basic services and no air points. Each aircraft will carry three cabin crew, as required by law, but the only "meals" will be free bottled water.

Freedom vice-president Wayne Dodge rejected suggestions that the move was an Air NZ strike at budget carrier Virgin, saying the new services were merely taking advantage of the gap left by Qantas NZ.

But Air NZ chief executive Gary Toomey said: "To sit back and wait for someone else to come in would not be good for our shareholders.

"I think we'll have pretty good coverage of the market when Freedom's up and running."

Christchurch aviation writer Les Bloxham described the no-frills service as "a brilliant move by Air New Zealand" which would scuttle Virgin's plan to fly domestic routes here.

Virgin would face huge start-up costs, which would leave it little room to undercut the Freedom fares and lure budget travellers.

The airline was likely instead to concentrate on a no-frills transtasman service, which would probably survive.

Qantas Airways group general manager, public affairs, Michael Sharp said the airline would keep working on its plans for New Zealand, and would make an announcement within a week.

"Our response to Freedom is pretty straightforward - it has no bearing on our plans."

Virgin's commercial operations head, David Huttner, said he still believed there were opportunities in New Zealand, especially flying between smaller centres.

"They are talking only about Auckland, Wellington, Christchurch," he said. "We will keep working on our plans."

Freedom's Mr Dodge said the airline was determined to offer the cheapest airfares in New Zealand and was "here to stay."

It would have to add to its 150 staff, but Mr Dodge was unable to say how many jobs would be created.

Freedom's announcement in Auckland was held jointly with an Air New Zealand news conference in Australia which centred on problems with its subsidiary, Ansett.

Mr Toomey said three of Ansett's 10 Boeing 767s had been cleared to fly after being grounded over safety issues.

Ansett will launch a $25 million, six-month advertising campaign in a bid to quell public concern about the airline.