New-look Joint Network Announced

Media Release
16 May 2011

Air New Zealand and Virgin Australia Airlines Group Announce New-look Joint Network

AUCKLAND and BRISBANE, 16 May, 2011 - Air New Zealand Ltd (NZSX: AIR) and Virgin Australia Airlines[1] (ASX: VBA) have today announced plans for their new-look joint trans-Tasman network, a key part of their new alliance.

The alliance will connect Air New Zealand’s domestic network of 26 ports to Virgin Australia’s domestic network of 31 domestic ports, offering the largest ever Australasian route network for trans-Tasman travellers. The new network announced today will be effective for the upcoming Northern Winter 2011 schedule (November 2011 – March 2012) and tickets will be on sale from July this year when the code share commences.

Under the new network, Air New Zealand will operate approximately 70% of the capacity and Virgin Australia’s Pacific Blue[2] airline will operate 30%, similar to the relative market share the airlines had prior to the commencement of the Alliance.

Total capacity is currently above that required by the alliance proposal to the Australian Competition and Consumer Commission (ACCC) and New Zealand Ministry of Transport (MOT).

The planned joint trans-Tasman network will see the adjustment of Air New Zealand and Pacific Blue flight times to ensure more convenient schedules for passengers, for example:

Brisbane-Wellington – previously both airlines had flights at similar times four days per week and no afternoon flights on some days. The new schedule will see Pacific Blue operate a double daily service of morning and afternoon/evening flights
Brisbane-Christchurch – previously both airlines had flights at similar times four days per week. The new schedule will see the two airlines operate a combined double daily service of morning and afternoon/evening flights
Queenstown-Sydney – previously both airlines had flights at similar times on Tuesdays and Saturdays only. The new schedule will offer a flight five days a week in peak demand months
Wellington-Sydney – previously both airlines had flights at similar times two days a week and no afternoon flights on some days. The new schedule will see Air New Zealand operating double daily services of morning and afternoon/evening flights

There will also be transferring of capacity on some routes between the two airlines where appropriate, for example:

Pacific Blue will take up Air New Zealand services between Sydney/Melbourne and Dunedin, operating during the December and January peak. There is also improved connectivity via Christchurch to new double daily Christchurch-Brisbane, Christchurch-Sydney and Christchurch-Melbourne services
Air New Zealand will assume all Wellington-Sydney flying and Pacific Blue will assume all Brisbane-Wellington flying

Capacity changes will occur on some routes to match demand and market conditions, for example:

Capacity on Air New Zealand Auckland-Adelaide services will increase by 16%, with a daily service in the peak summer months, and Auckland-Perth services will increase to eight times per week (up 4%) over the summer peak.
Air New Zealand will take over operation of the Auckland-Cairns route and frequency will be matched to projected demand
Total capacity into and out of Wellington is up 3.5%, with Melbourne-Wellington enjoying the largest increase of 10.5% and Brisbane-Wellington up 5%
Capacity on Christchurch markets will be reduced by around 14% to match the ongoing reduction in demand as a result of the recent earthquakes

Total capacity to and from Auckland remains unchanged, including Air New Zealand’s wide body services on Auckland-Sydney, Auckland-Melbourne and Auckland-Brisbane.

“Since we received ACCC and MOT approval in December 2010, we have had dedicated teams from both airlines working closely together to optimise the network,” Air New Zealand Group General Manager Australasia Airline Bruce Parton said.

“The changes better match capacity to demand and in many instances this means a greater range of flight times by removing ‘wingtip flying’, as well as better connections to domestic Australia and domestic New Zealand flights.

“In addition, as indicated last year, we are actively looking at a couple of potential new trans-Tasman routes which we will likely make a decision on before the end of the year,” says Mr Parton

Virgin Australia Group Executive Commercial Liz Savage said: “With plans for the joint network now in place, we are focusing on the launch of our comprehensive product offering in early July. We will provide reciprocal Velocity and Airpoints frequent flyer programmes and lounge access in Australia and New Zealand, as well as a coordinated offering of in-flight products and services, so that guests will receive similar first-rate service and benefits, no matter which airline they fly.

“Virgin Australia and Air New Zealand are also committed to growing the market, with plans to grow capacity further from March next year for the Northern Summer schedule.

“Regional areas in Australia and New Zealand will also see significant benefits from the alliance, as the two airlines will offer code share flights on each other’s domestic services as part of connecting Tasman journeys. This will open up regional destinations in both countries like never before, making it easier for regional residents to get across the Tasman and for tourists to access regional destinations in Australia and New Zealand,” says Ms Savage.

The Alliance has four key components:
A broad free-sale code share arrangement covering all Tasman sectors and domestic Australian and New Zealand sectors as part of a connecting journey
A revenue share agreement
Reciprocal loyalty scheme benefits to members of Air New Zealand’s Airpoints loyalty programme and Virgin Australia’s Velocity Rewards programme.
Reciprocal lounge access to qualifying guests of either airline

Ends

[1] Formerly known as the Virgin Blue group of airlines.
2 Pacific Blue will also operate under the name Virgin Australia by the end of 2011.

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