In April 2018, Air New Zealand announced that they would end a seven-year partnership with Virgin Australia, citing difficulties with low-cost carrier Tigerair among other situations. Days after the divorce was sent to the press, flyers are now getting a better look into why the two carriers went different directions.
Earlier in April, Air New Zealand shocked the South Pacific by announcing they would not renew a long-standing agreement with partner Virgin Australia. Days after the announcement, New Zealand’s Newsroom is putting the pieces together on how the partnership came to an end.
The abrupt message was handed down by Air New Zealand to Virgin executives and was based on several concerns, including the expansion of Virgin’s low-cost subsidiary, Tigerair. Virgin Australia chief executive John Borghetti was reportedly surprised by the announcement, but has begun positioning for competition with their once-friendly airline.
So what went wrong between the two? According to reports, it started with a bid by Air New Zealand CEO Christopher Luxon attempting to force Borghetti out of office when he was on the Virgin Australia board. The attempted coup failed, resulting in Air New Zealand divesting their 25.9 share of Virgin and Luxon leaving the board.
The clash of leadership wasn’t the only problem. Insiders at the company also cite cultural differences, as both executives come from different industries. The result is two carriers operating in conflict, which can hurt the passenger experience.
Although Air New Zealand once sought an opportunity to enter the Australian marketplace, it no longer wants to be a staple at Australian airports. Instead, Newsroom suggests the carrier will focus primarily on being the dominant carrier between New Zealand and the world.
Finally, the two airlines have gone different competitive directions, resulting in a forced relationship between the two carriers. With Air New Zealand already part of Star Alliance, the carrier considers Virgin Australia a small part of their operations. The breakup allows them to focus on more profitable partnerships.
But even in breakup, there is opportunity. Virgin Australia promises they will remain competitive in New Zealand and are reportedly considering bringing Tigerair to the country. Meanwhile, Air New Zealand will add new trans-Tasman routes between Australia and New Zealand in December 2018.