Qantas owned Jetstar has announced that it plans to significantly expand into the New Zealand domestic market, putting pressure on Air New Zealand’s (ASX:AIZ) domestic stronghold. Jetstar has been operating in New Zealand since 2005 and completely replaced Qantas on domestic services in 2009. The company focusses mainly on the major routes between Auckland, Wellington, Christchurch and Dunedin and also the tourist hotspot of Queenstown.
Zealand Prime Minster John Key and Qantas chief executive Allan Joyce are meeting at 12pm (AEST) time today to discuss and present the announcement. Having both Mr Key and Mr Joyce present represents the significance of the announcement.
Leading into the announcement Air New Zealand shares fell approximately 10 percent from $2.65 to $2.40 taking their share price to a six month low.
The announcement comes as a big blow to Air New Zealand after news last week that American Airlines and Qantas have announced a strategic alliance creating new routes between Australia and the US, putting pressure on one of Air New Zealand’s key markets.
Recent years have seen Air New Zealand drop domestic flights to several smaller regional towns and as they plan on retiring their fleet of 19-seater Beech 1900D aircrafts by August 2016. Stating that over the past 2 years the company has been losing $1 million a month on routes served by the Beech fleet.
However Air New Zealand have recently announced that they plan to add 650,000 seats to domestic flights over the coming year by adding bigger planes and more flights to their main domestic routes.
Earlier this year Jetstar also announced that they will be running daily return flights between Avalon Airport and the Gold Coast in order to secure Avalon’s future. The announcement was released without a confirmed date however the services will now commence as of October this year.
Minister of tourism and major events, John Eren stated yesterday "With new daily flights to Avalon, more people will see Victoria's amazing attractions and visit our world renowned events."
Author: Imran Valibhoy
Jun 18, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.