Air New Zealand, Virgin Australia terminate partnership

Air New Zealand and Virgin Australia are ending their strategic alliance covering flights between the two countries. Their current authorization from Australian regulators is scheduled to expire in October and the airlines will not be seeking a renewal, Air New Zealand said in a statement.

Virgin Australia confirmed in a market filing that it received notice that Air New Zealand intends to break off their partnership.

Ending the alliance will see the two carriers become rivals in the already fiercely contested Australia-New Zealand market.

The alliance has been in place since late 2010, although relations between the partners have worsened in recent years. Air New Zealand bought a stake of almost 26% in Virgin Australia, but Air New Zealand sold its shares in 2016 after becoming increasingly frustrated at Virgin’s direction. Some frequent flyer and lounge benefits between the two were wound back last year.

Air New Zealand currently has about 170 weekly return services between Australia and New Zealand, and Virgin Australia has up to 100. The other major player on these routes is the Qantas/Emirates partnership.

The dynamics of the Australia-New Zealand market have changed since the alliance was introduced, Air New Zealand chief revenue officer Cam Wallace said. “The time is now right for each airline to focus on its own objectives.”

“Australia is the largest source of inbound visitors to New Zealand and Air New Zealand has built up a significant presence in this market,” Wallace noted. Ending the partnership “will enable us to deliver a more consistent customer experience by using our own fleet and delivering an improved schedule, which we’ll provide more details about shortly.”

Virgin Australia has had a “strong presence” in the New Zealand-Australia market since 2004, Virgin CEO John Borghetti said. The airline will “continue to enhance our offering to suit both the business and leisure markets,” he said. Flights between the countries will remain “an important part of our network and strategy as an airline group.”

Borghetti said the split “provides opportunities for the Virgin Australia Group” in this market, and hinted that it could introduce its LCC subsidiary Tigerair on these routes as well as the full-service Virgin Australia brand.

Tigerair, which flies a mix of Airbus A320s and Boeing 737-800s, does not have any international services since withdrawing from the Bali, Indonesia market in February 2017. If it were to begin flights to New Zealand, it would have to undertake the standard government and regulatory approval processes.

Virgin Australia and Air New Zealand will “work through” changes to codeshare, flight scheduling, lounge access and frequent flyer reciprocity, the Australian carrier said. Bookings for flights before Oct. 27 will be unaffected.

(Adrian Schofield - Aviation Week / ATWOnline News)