Tuesday, August 17, 2010

Virgin Blue axes New Zealand

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Pacific Blue, a subsidiary of Richard Branson’s Virgin Blue, is axing its New Zealand domestic operations after suffering from years of heavy losses. It will redeploy planes and staff on transtasman services to Australia.

The cost of flying within New Zealand is also expected to spike, with Air New Zealand and Jet Star now the only two remaining domestic carriers.

Pacific Blue will redeploy its 737 aircraft in New Zealand to trans-Tasman and Asian routes. Its long-haul offshoot, V Australia, will also stop flying to Fiji, and instead switch Pacific Blue’s 737s to this leisure route.

The decision to pull Pacific Blue out of New Zealand has been tipped for more than 18 months as margins have been squeezed ever tighter. Last year, Jetstar replaced its parent, Qantas, on domestic routes.

Virgin Blue’s chief executive, John Borghetti, said that Pacific Blue was continually draining money in New Zealand because three airlines were competing for travellers in a country of just 4 million people.

He declined to put a definitive figure on the losses, but said they had been in the tens of millions since it began there about three years ago. ‘‘The prospects of it turning a profit are not good so there really is no point continuing,’’ he said.

Borghetti also insisted that Virgin Blue’s proposed tie-up with Air New Zealand on trans-Tasman services was not related to its decision to withdraw from New Zealand.

Virgin Blue said it would boost its workforce in New Zealand by 100 to 550 over the next six months to service flights across the Tasman and to the Pacific islands.
However union claims that jobs would be lost, and that any new crews would lower wages.

Borghetti said the move was just the first phase of the network review, and he did not rule out the airline flying to other destinations such as Tokyo. Pacific Blue will increase flights over the coming months between Australia and Phuket, Bali and three New Zealand cities.

V Australia’s flights between Sydney and Los Angeles will also be increased to daily services from December, and it will operate an extra weekly service from Melbourne to Johannesburg, LA and Phuket.

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