Thurs "Sydney Morning Herald"
Virgin threatens 40% price cut to NZ
August 7, 2003
The looming trans-Tasman airfare war could turn into a bloodbath, after Virgin Blue's chief executive, Brett Godfrey, yesterday threatened to slash fares by more than 40 per cent.
With Air New Zealand aiming to cut costs by more than 20 per cent through its no frills, yet-to-be launched Tasman Express, and Emirates recently cutting fares on some of its introductory flights to Auckland by 20 per cent, Mr Godfrey said Virgin could slash fares further and still turn a tidy profit.
"I don't believe [the Tasman] route needs to be unprofitable. It's one of Australia's largest routes and it's New Zealand's largest. Don't forget Tasman Express is dual class," he said.
"You won't get the same cost base for dual-class aircraft compared to a one-class aircraft."
With Virgin barred from using the Virgin Blue name outside Australia, it is understood it will be called Pacific Blue.
With Virgin Blue reapplying for landing slots in New Zealand last week, Mr Godfrey said he supported the proposed $550 million alliance between Qantas and Air New Zealand if Qantas "moved in Air New Zealand's terminals", freeing terminals for Pacific Blue.
At the opening of Virgin's Blue Room lounge in Sydney yesterday, Mr Godfrey took a swipe at Qantas's three-year $1 billion cost-cutting program.
"We've got Qantas going on about their cost base . . . [but] they give away food, they have business class, they are members of a very expensive global alliance," he said.
Virgin was upgrading its product offering by launching nine business class-sized "Blue Zone" seats on each of its Boeing 737s, at an extra cost of $30. Mr Godfrey said the airline would maintain its low-cost "mantra" by offering the extra services to passengers on a user-pays basis, with the Blue Room charging a $5 entry fee, and a "pub price" of $5 for a stubby of Victoria Bitter.
He said "registered corporate accounts" had increased from 2 per cent to 20 per cent of the airline's passengers in three years.
Meanwhile, the director general of the International Air Transport Association, Giovanni Bisignani, said the "attitude" of competition regulators and bilateral "open skies" agreements between countries and national ownership rules, were "the three pillars of stagnation" in global aviation. Mr Bisignani, who represents the interests of 277 member airlines, told a National Aviation Press Club lunch yesterday: "The proposed Qantas-Air New Zealand alliance is a clear example of what needs to happen throughout the industry."