Virgin Blue and Air New Zealand alliance approved by Australian and NZ governments

By David Flynn, December 21 2010

Update

The New Zealand government has today approved the trans-Tasman alliance between Air New Zealand and Virgin Blue.

With Australia's ACCC already giving the nod to this partnership, it sets up both airlines for a 2011 attack on Qantas' lucrative Tasman route as well as opening new direct routes between regional centres.

Virgin Blue and Air New Zealand will now be able to codeshare trans-Tasman and connecting domestic flights as well as offer reciprocal access to lounges and their respective Velocity and Airpoints frequent flyer programs.

In a statement issued by Air New Zealand, the Kiwi flag-carrier's CEO Rob Fyfe said "We and Virgin Blue have a team working closely to ensure we move ahead quickly with bringing the alliance to life over the coming months."

Eleven airlines currently fly between New Zealand and Australia. Air NZ has an estimated 38 percent share, with the combined operations of Qantas and Jetstar at 32 percent, while Virgin's Pacific Blue arm holds 18 percent.

Virgin Blue and Air New Zealand are set to join forces in a trans-Tasman alliance after the ACCC (Australian Competition and Consumer Commission) today granted conditional approval for shared operations between the two carriers over a three year period to the end of 2013.

The partnership could result in up to 80 more flights across the Tasman each week, and will include new direct services between regional destinations in Australia and New Zealand.

In addition to code-sharing flights, passengers will have access to the lounges of both airlines and reciprocal loyalty arrangements between Air New Zealand’s Airpoints and Virgin Blue’s Velocity Rewards programs.

The deal could reshape the way frequent flyers shuttle between Australia and New Zealand and provide Virgin Blue with another high-traffic and high-value route out of Australia, and thence through Air New Zealand's network on to the rest of the world.

The proposal still requires the blessing of New Zealand’s Ministry of Transport, however the MoT is said to be in favour of the proposal.

"The ACCC considers that the alliance is likely to benefit passengers in a number of ways including more choice of routes and frequencies, and potentially lower fares as a result of cost savings and efficiency improvements," ACCC chairman Graeme Samuel said.

The AirNZ partnership is crucial to Virgin Blue CEO John Borghetti’s plans to expand the airline’s traffic, including a larger slice of the lucrative business travel market, by building a global network of airline alliances and transforming ‘the new Blue’ into Australia's second international carrier.

Virgin Blue already has a middle-eastern partnership with Etihad and is pursuing US approval for a similar arrangement with Delta Air Lines. Borghetti has also spoken many times of his desire to form a partnership with a leading Asian carrier.

The move could also see Virgin Blue move closer towards joining the Star Alliance network.