Arch-Rivals Qantas And Air New Zealand Announce Surprise Partnership

If it was two months earlier I would have thought it was an April Fools’ joke.

While Qantas’ biggest rival is undoubtedly Virgin Australia, their second biggest rival is probably Air New Zealand. Virgin Australia and Air New Zealand used to have a very close alliance, as part of Virgin Australia’s unpopular ‘global virtual alliance,’ but this is being rapidly wound back this year after Air New Zealand sold its stake in Virgin Australia, and started rapidly cutting ties with its partner.

So it is most surprising that Qantas has announced a codeshare partnership with Air New Zealand, for travel commencing on 28 October this year. As Qantas describes it:

Qantas intends to add its code on up to 30 routes on Air New Zealand’s domestic network and Air New Zealand intends to add its code on up to 85 routes on Qantas’ domestic network.

Coordination of check-in and handling at airports will mean shorter connection times, opening up more onward flights for customers on each carrier’s domestic networks and faster journey times overall.

Eligible customers will have access to a combined total of 36 domestic lounges on both sides of the Tasman when flying on routes covered by the code-share agreement.

However note that the codeshare flights are only on domestic Australian and New Zealand routes — not the Trans-Tasman flights the two airlines fiercely compete on, or any long-haul routes.

So they are only routes that one of the two airlines fly, not both.

Codeshare routes

Here are the 30 Air New Zealand domestic routes that Qantas will add its code to:

And the 85 Qantas domestic routes that Air New Zealand will add its code to:

So for example, if you are flying from Bangkok to Dunedin, you will be able to book the entire journey on Qantas flight numbers, flying a mix of Qantas and Air New Zealand metal.

Similarly if you were flying from Rotorua to Broome, you could book all Air New Zealand flight numbers on a mix of Air New Zealand and Qantas metal.

That’s certainly a win for consumers.

So why is this happening?

Air New Zealand seems to want nothing more to do with Virgin Australia anymore. So to rub salt in the wound, they have turned around and commenced a partnership with Virgin’s biggest rival, Qantas.

There has been all sorts of wild (and completely unfounded) speculation in the Australian frequent flyer community over the past 24 hours that this means suddenly Air New Zealand would be leaving Star Alliance and joining oneworld, but I don’t see that happening – for now, this is just a codeshare partnership.

Qantas and Air New Zealand actually have quite a lot in common. They’re both geographically disadvantaged ‘end of the line’ carriers, who can’t rely on just transferring passengers through their hubs. They’ve both achieved excellent profitability by making unpopular decisions, that they know their passengers will accept, and will keep flying with them.

They also both have extremely profitable loyalty divisions as a result of loyalty customers using their poor value frequent flyer programs.

Qantas CEO Alan Joyce has said of Air New Zealand as part of this announcement:

We have a lot of respect for them as a competitor

I guess that’s a polite way of saying ‘we both dislike Virgin more than we dislike each other?’

The codeshares just happen to start the same day the existing and long-standing codeshares between Air New Zealand and Virgin Australia end.

In response to the news, Virgin Australia has said:

With the two major players in the New Zealand domestic market in partnership together, there’s no real competition in New Zealand, and it is the consumer that will lose out

They are referring to Jetstar’s limited domestic flights in New Zealand, Jetstar being the low-cost arm of Qantas. Jetstar will not be changing these domestic flights, nor will they be part of the new codeshare agreement.

Bottom line

I knew Air New Zealand and Virgin Australia had fallen out big-time, but I didn’t realise relations were this bad. I don’t expect Qantas and Air New Zealand to cooperate on the level Qantas does with American Airlines, nor do I think anyone will be changing alliances.

It sure would be odd to access an Air New Zealand lounge with a Qantas loyalty card though!

Virgin Australia really needs a new strategy, if their backyard is going to change as quickly and dramatically as this.

However, this is all subject to regulatory approval, and it would seem to decrease competition in the Australia/New Zealand market, so may not even be approved.

What do you make of Qantas and Air New Zealand’s new partnership?

Comments

  1. Elements of a cartel aiming to damage the business of a 3rd party. Not good for consumers.

  2. James -Quick question. Does this mean that Qantas flights (using NZ Codeshare flight numbers) will be eligible for United’s Excursionist Perk. I.e flying UA from SFO to SYD, using an NZ Codeshare on QA metal SYD-MEL, then MEL-SFO on the return.

    Previously this would have been impossible since there were not Intra-Austrailia Star alliance partners.

    Potentially a really nice perk for United awards or am I misinterpreting this?

  3. Virgin Australia must have pissed off Air New Zealand in a big big way. I think this will be approved as they’re not codesharing in the trans-trasmanian market. That would lead to a monopoly and there’s zero that would get approved.

    I was indeed very surprised when i read that last night. Virgin Australia is now left outside alone.
    Very interesting.

  4. This seems like it would (at least slightly) damage NZ domestic competition. If Qantas can start funneling passengers into AirNZ flights, surely it’s going to impact Jetstar’s domestic operations?

  5. FWIW – Virgin Australia has been feeding Singapore Airlines Trans-Tasman route (Melbourne-Wellington). At first I thought that was a very strange Trans-Tasman combination being listed on search engines. I would have thought that Virgin Australia would’ve been feeding the Air New Zealand MEL-WLG flight – but nope – VA definitely feeding SQ.

  6. Regulatory approval is not needed for these codeshares.

    Qantas will still continue to book passengers onto Jetstar NZ domestic services.

    Also it was quite evident that VA had well and truly pissed NZ off. I mean NZ went from partner and shareholder to basically selling out as quickly as they could and wanting as little to do with VA as quickly as was possible. Luxon wanted to remove Borghetti as CEO, but was unable to. The next VA partner very unhappy is SQ… Virgin Australia have no strategy at the moment and no idea what they’re doing.

    What a mess.

  7. I don’t think this will easily get past the anti-trust watchdog … and I’m sure Virgin will do whatever possible to send the watchdog out!

  8. will you be able to redeem AA miles for NZ domestic travel on air NZ w/ qantas codeshare? and UA miles for AUS domestic travel on qantas w/ air NZ codeshare??

  9. Borghetti needs to go… as simple as that. Everyday VA is losing strength and their “virtual alliance” is becoming more of a joke. Yes, he did great things but time to call it quits and let someone else with fresh ideas to step into the role. Otherwise I’m afraid this is going to be like Ansett.

    If SQ gets pissed off, VA will mainly rely on EY which is as disastrous like them atm and DL. So time for VA to think of joining an alliance (hello Sky team, even if it’s crap, it will save them).

    By the way things are unfolding for VA, I would be a very nervous gold/platinum VA FF and looking for a status match somewhere else…

  10. This is a codeshare agreement only & not a joint venture or the likes.
    Therefore it’s not subject to regulatory approval apparently. That’s the thing that stinks!

    I’m wondering how Singapore Airlines is feeling about this, with them having a joint-venture with Air New Zealand & all & then also shares in Virgin Australia. I’m sure they’re a little peed at Christopher Luxon (NZ CEO) at the moment!

    Interesting times in the skies of the land Down Under!

  11. @PVM, why would Singapore airlines be peeved at Air NZ? Not like SQ are particularly happy with VA cosying up to their Chinese shareholders (both onward flights and capital). Borghetti pissed off SQ when they took on Hainan

  12. While the deal itself doesn’t require ACCC (Australian regulator) approval, it seems like it has review powers and could strike the deal down as anti-competitive

  13. @PVM
    SQ & Air NZ already have a sort of joint venture between Singapore and New Zealand. Air NZ now even operates one of the frequencies that were previously operated by SIA between Changi & Auckland. SIA can’t be bothered in this case. If anything, they’re in bed with Air New Zealand.

  14. So the elite powers are winding down control of the Virgin brand or getting rid of it all together.

    VX Gone
    VS 80% owned by other carriers now
    VA ??? They are coming for you!!

  15. Legacy airlines seems to like the “entre-soi” between us legacy habits.

    “Those challenging airlines are boring now, let’s go back to the old legacy way between ourselves” they must think ^^

  16. Everyone who thinks this will increase the ability to use AA/AS/UA/whatever miles is in for a disappointment. On codeshare flights it is the operating carrier that matters for the ability to book award seats. Except in some very rare circumstances, award seats are not made available under the code of the codesharing carrier.

  17. Qantas has spent much of the the last few decades trying to destroy Air New Zealand, even the Ansett debacle had their fingerprints on it. While this move doesn’t accomplish that goal, it does substantially weaken Virgin’s position as their only domestic competitor and ties up ANZ from any other way of competing in Australia. QA wins here. NZ doesn’t lose, but they aren’t winning like they think they are. I can’t help but think that Luxon is really still punishing Borghetti for not doing what he wanted.

  18. between this and the MU flight to PIT, I thought that it was a Joke…

    Honestly, I would’ve expected a DL and NH codeshare long before this (hence DL selling NH tickets)

  19. The JV is not really surprising seeing that both CEOs see a common enemy in Borghetti.

    Although VA doesn’t have the money to join an Alliance, joining SkyTeam would be beneficial for them (esp their TransPac JV partner Delta). It may also help them with their loads on their Trans-Tasman flights and may give them a option to join up with GA through handing over the remaining DPS flights to GA in return for GA putting a code on their East Coast-NZ flights.

    SQ is going to have to live with it should they chose not to exit VA. The door is firmly shut on the Star Alliance option as rivals NZ and UA would veto/block any VA entry, and Oneworld is out of the question due to their bigger brother.

  20. It’s actually funny I am in NZ now and flew QF over and am leaving on Air NZ to MEL then VA to Perth as the codeshare

  21. While this move doesn’t automatically require regulatory approval, I’d hope that it can be assessed for being anti-competitive.

    It’s bad for the consumer to cede the market to a partnered duopoly, as this move does.

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