Home' Asian Aviation : AAV May 2010 Contents 18 AsianAviation | MAY 2010
Flamboyant Virgin Group chief executive
Sir Richard Branson knows how to
milk publicity; but he is also known to
be a shrewd dealmaker. e Australian
holder of the Virgin licence, Virgin
Blue Airlines, does what it can to ape its
bigger cousin's style and occasionally pulls it o .
So when Virgin Blue staged the announcement of a
cabin-crew exchange programme with US stablemate
Virgin America, the carrier was hoping the event would
yield nicely choreographed photo shoots of pretty
stewardesses. Instead, questioning focused on another
exchange programme, a full cooperation agreement
with Air New Zealand (ANZ), which the Brisbane-
based carrier had been trying to keep under wraps.
e Virgin Blue group of airlines now includes
long-haul V Australia as well as New Zealand-based
Paci c Blue. e latter will now code-share with ANZ
on all its 70 weekly ights across the Tasman Sea that
separates Australia from New Zealand, while the ag
carrier will do likewise with its 210 weekly frequencies.
Onward code-sharing to some of Virgin Blue's
network within Australia and Air New Zealand's
domestic routes is also part of the plan that is set to
be put to Australasian competition watchdogs in May.
Outgoing Virgin Blue Chief Executive O cer Brett
Godfrey says the deal will give the partners about 56
percent of all trans-Tasman ight capacity, while its
biggest competitor Qantas, together with its low-fare
o shoot Jetstar Air ways, holds 34 percent.
Both carriers expect regulatory clearance despite
the dominant position, since there are seven airlines
already operating between Australia and New Zealand,
with Malaysia's AirAsia X and China Southern Airlines
waiting in the wings with to take advantage of h-
freedom rights by adding onward ights. "It is one of
the most liberalised routes in the world," Godfrey says.
Godfrey claims annual cost savings of around A$15
million (US$13.6 million) can be achieved through the
arrangement, by better aircra utilisation. However,
his counterpart in Auckland, Rob Fyfe, says the main
bene t would come largely from increased passenger
numbers and a less-volatile revenue stream.
Since the collapse of Star Alliance airline Ansett
Australia in 2001, ANZ's penetration of Australian
cities had been one of its weaknesses, leading it to sign
a Faustian code-sharing pact with Qantas in 2006 that
was ultimately rejected by anti-trust bodies. Together,
the two carriers would have controlled 80 percent of
According to analyst Jason Familton at First NZ
Capital, this alliance addresses that issue of ANZ's
market penetration. "If you look at both airlines'
current routes and current exposure, it's the bit that's
missing from Air New Zealand," he says. In itself,
Paci c Blue is still a minor player in New Zealand's
domestic market, he adds.
ere is little direct competition, but the two carriers
will realign their schedules to avoid "wingtip ying,"
Godfrey says. A better spread of ights throughout
the day will compete more vigorously with Qantas, he
adds. e two carriers are also predicting that fares will
fall as a result, since neither has plans to cut frequencies.
e two carriers have moved towards a similar
strateg y in recent years. e New Zealand ag carrier
is a legacy carrier that, like Ireland's Aer Lingus, has
been forced by its geographic position and competitive
business environment to adopt low-cost business
methods. Virgin Blue, meanwhile, has moved away
from its low-cost origins to occupy second place in
Australia's full-ser vice market.
Both ANZ and Virgin Blue now have long-haul
routes (which remain) outside the scope of this
agreement), but neither matches Qantas's long-haul
Virgin Blue has also long been rumoured to be
a potential future Star Alliance member, with the
alliance's Chief Executive Jaan Albrecht having publicly
invited the carrier several times. But Virgin Blue has
also signed full free-sale deals with SkyTeam's Delta
Air Lines that are set to enter into force in mid-year, as
well as with non-aligned carriers such as Emirates and
e new relationship with Delta is being taken
seriously, Godfrey says, adding that he was to talk the
US carrier to assuage any fears of close links with the
United Airlines-founded Star Alliance.
Godfrey says Virgin Blue's strategy is to remain
unaligned, although future plans will now become
the responsibility of his successor, John Borghetti,
the former second-in-command at Qantas mainline
operations, who formally took up his new post on 8
Although the ANZ partnership leaked into the open
earlier than planned, Godfrey says he and Fyfe have
been meeting "frequently" over the past 18 months to
see how best to work together. More close cooperation
is planned, he says, without elaborating.
e two products will be "aligned" in some ways,
although Virgin Blue has just introduced a premium
economy class on its trans-Tasman routes at a time
when Air New Zealand is pulling its business class
For now, though, there is no sign of a cabin-crew
swap with Air New Zealand -- which may disappoint
some fans of the Kiwi carrier's recent, eye-catching
advertising campaign, which featured its sta wearing
nothing but body paint.●
Virgin Blue, Air NZ form
Justin Wastnage / Sydney
Virgin Blue has been moving away from its roots as a low-cost carrier. Credit: Boeing
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