Pacific Blue Launches NZ Domestic Operation

Pacific Blue—the New Zealand unit of Virgin Blue Holdings Ltd.—is to launch a new domestic airline service in New Zealand, starting in mid November. The new service, which will be based at Christchurch, will use Boeing 737-800 aircraft (two more of which are being added to Pacific Blue’s fleet) and will operate main-trunk routes between Auckland–Wellington, Auckland–Christchurch and Wellington–Christchurch.

The airline will be offering special “launch” price fares of NZ$39, but standard fares will be $69–$79. Virgin is pledging that at least half of its seats will be available for less than $99 for the first six months.

Virgin Blue Group’s chief executive Brett Godfrey has described Pacific Blue’s new move as “a major investment and a long term commitment to keeping the ‘air fair’ in New Zealand.”

In apparent response to concerns of a “price war”, Air New Zealand’s shares dropped 8.6 percent in the wake of Pacific Blue’s announcement. However, it is unlikely that the latest move by Pacific Blue was a surprise to Air New Zealand, which has cut its fares to match Pacific Blue’s. Air New Zealand is expected to announce a new low-cost strategy and amended route structures in response to this latest competition from Pacific Blue.

Qantas’s trans-Tasman discount airline, Jetstar, has said it plans to operate a New Zealand network and there is speculation that because it is highly unlikely that the market could support four separate domestic airlines, it may be the intention for Jetstar to take over Qantas’s New Zealand domestic services entirely.

The Travel Agents Association of New Zealand (TAANZ) is one group happy with the airline’s entry into the New Zealand domestic market, believing it will stimulate competition and grow the market.

However, TAANZ’s chief executive, Paul Yeo, said that “Whilst this is good news for those travelling between Auckland, Wellington and Christchurch it doesn’t relieve the pressure for provincial destinations who will still bear the brunt of high fares. We’re looking forward to Pacific Blue’s future decision to possibly open up new routes once they become established here.”

While Pacific Blue’s New Zealand domestic routes will initially be flown by Boeing 737s the Virgin Group recently ordered 20 Embraer E-Jets (E-170 and E-190) and there is speculation that some of these aircraft may be introduced to New Zealand at a later date.