Virgin Blue, Air New Zealand Trans-Tasman Alliance Talks

Air New Zealand (AIZ) and Virgin Blue (VBA) are in talks over a possible Trans-Tasman alliance. The potential cooperative alliance will help reduce costs for both airline carriers for a route which has been marginal or loss making.

The Sydney to Auckland flight route is the most competitive out of Australia and is the busiest international route out of the country with eight airlines servicing the route. These include: Air New Zealand, Virgin Blue and its subsidiary Pacific Blue, Qantas Airways, its discount subsidiary Jetstar and Emirates Airline. According to Australia's Bureau of Infrastructure, Transport and Regional Economics (ABITR), 5.3 million passengers used the route last year.

Possible alliance options may include codeshare agreements or a full joint venture. Virgin Blue and Air New Zealand issued statements yesterday saying they had been in talks for months about "commercial co-operation on trans-Tasman markets". Macquarie Equities has estimated savings of up to $55 million from a merger of Air New Zealand and Virgin Blue due to reduced scheduling, maintenance and engineering costs. An alliance - rather an equity transaction - would lessen those benefits but "could be easier and less politically challenging to execute".