Jetstar may provoke price war

Qantas subsidiary and budget airline Jetstar's domestic launch in New Zealand - offering seats for possibly 30% more passengers into Queenstown - is expected to prompt a domestic price war in the months ahead.

Jetstar is not only upgrading its navigational software to include the crucial RNP (Required Navigational Performance) system to allow it to compete with Air New Zealand to get in and out of Queenstown in inclement weather, but is now also considering flights to Dunedin International Airport, which last week lost some Air New Zealand capacity.

While only replacing Qantas' existing domestic service and offering slightly fewer weekly flights, at 84, Jetstar will increase passenger capacity by more than 40% on some routes such as Queenstown, which will benefit from a 29% increase of weekly seats from 1920 at present to 2478, with three flights a day.

Jetstar's arrival in New Zealand has long been speculated on, with its chief executive Bruce Buchanan announcing yesterday the airline would beat any competitor's domestic prices by 10%.

When interviewed, Mr Buchanan said the aim was not to start a price war, but he was adamant the budget airline would "remain price-competitive" against other airlines in order to increase passenger numbers.

Destination Queenstown chief executive Stephen Pahl welcomed the Jetstar announcement saying it was "extremely good news for Queenstown".

It was introducing the RNP system Qantas did not have to counter low-visibility problems, the Airbus A320's increased 41-seat capacity could be a "great boost" and Jetstar's business model was suited to the economic times.

"We are meeting Jetstar on Thursday to look at their medium and long-term plan for Queenstown," Mr Pahl said.

Even if Jetstar were only able to increase passenger numbers by 20-30 seats for each A320 flight, it would be a "huge boost" for tourism in the area, he said.

Mr Buchanan said expanding domestically in New Zealand posed few problems in a recession, given oil had dropped from record highs of $US147 ($NZ282.90) a barrel last July to about $US35 at present, which prompted better fares for passengers.

Borrowing rates had also decreased.

The RNP navigational system would be installed between September and December this year, specifically for use at Queenstown airport, and all aircraft would be RNP-capable by the end of the year, he said.

He confirmed that once the new service was in place, Dunedin was "definitely among a number of airports" around New Zealand where Jetstar was considering setting up new services.

However, it was too early to speculate on any details, he said.

Beginning in early June, Jetstar, which has been operating from Christchurch since 2005, will base a fleet of six A320s in New Zealand, to carry 177 passengers each in a single class.

They will be evenly spread between Christchurch and Auckland to support its domestic New Zealand and transtasman operations, including a Qantas code share for all Jetstar domestic and transtasman services.

Jetstar's Christchurch-to-Australia flights will increase to 42 weekly with the new service expanding in Auckland.

Jetstar began by offering one-way promotional fares of $1 for two and a-half hours until 2.30pm yesterday for domestic flights between July September.

There were 50,000 responses and 14,000 $1 fares sold, and it is next offering a website one-way promotional launch of $29 domestic fares.

Qantas will drop its weekend flights from Wellington to Brisbane but increase flights to and from Auckland, from where it will offer one-stop connections to Queenstown, Christchurch and Wellington.

About 250 jobs will be created within the Jetstar service, but there are expected to be some Qantas job losses.

Last week, Air New Zealand announced expanding its weekly Australian flights to Queenstown to 10 at the height of the ski season between July and August.

However, that increase came at the expense of cancelled or postponed flights out of Dunedin and Hamilton.

 

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