The Air New Zealand and Virgin Australia alliance is over

Photo by Hagen Hopkins/Getty Images
  • The trans Tasman alliance between Virgin Australia and Air NZ is ending.
  • They won’t re-apply for regulatory approval at the end of October this year.
  • The airlines are working through arrangements for codeshare, scheduling, lounge access and frequent flyer programs.

Virgin Australia says Air New Zealand has given notice that it intends to end the seven-year strategic alliance between the two airlines.

The airlines created the alliance at the end of 2010 to cooperate on services between New Zealand and Australia.

The two catered for about 58% of trans-Tasman airline seat capacity.

Regulatory approval for the alliance expires at the end of October this year. Air New Zealand says the parties will not apply for renewal.

A short time ago, Virgin Australia shares were down 4.3% to $0.220. Air New Zealand shares were up 3.3% to $3.11.

Virgin Australia CEO John Borghetti says the end of the deal provides opportunities, including operating both the Virgin Australia and Tigerair Australia brands in the market.

“The Virgin Australia Group has had a strong presence in the market since 2004 and we will continue to enhance our offering to suit both the business and leisure markets,” he says.

“Virgin Australia will continue its strong focus on providing competition and outstanding service on the Tasman, which remains an important part of our networkand strategy as an airline group.”

Relations between the two airlines became distant in 2016 when Air New Zealand announced it planned to sell its share holding in Virgin Australia.

Australia is the biggest source of New Zealand’s inbound passengers.

Virgin has been expanding its international services, including a new daily Sydney to Hong Kong service from mid this year.

Air New Zealand Chief Revenue Officer Cam Wallace says market dynamics on the Tasman route have changed.

“Australia is the largest source of inbound visitors to New Zealand and Air New Zealand has built up a significant presence in this market,” he says.

“This move 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.

“We remain fully committed to our other alliance relationships and our overall global airline alliance strategy as a critical success factor in other markets.”

Current trans-Tasman alliance arrangements will remain in place until October 27.

Those booked with Air New Zealand to travel on Virgin Australia service, or vice versa, after October 28 will be contacted by their booking airline.

The airlines are working through arrangements for codeshare, scheduling, lounge access and frequent flyer programs.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.