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AIR FARES between New Zealand and Australia could tumble in a "war of attrition" between Air New Zealand and Qantas after the New Zealand Commerce Commission rejected the airlines' controversial alliance plan.
Qantas wanted to buy around 22 per cent of Air New Zealand, which the Kiwi airline agreed to, in a bid to remain in business.
Airfares were already substantially cheaper on domestic and trans-Tasman routes after Air New Zealand introduced its lower-cost Express model, managing director Ralph Norris said. "Domestically, prices are at a pretty good level, but I wouldn't discount the thought that prices might go lower.
"On the Tasman, we are seeing intense price competition, particularly from [other international] carriers," he said.
The threatened war of attrition has already started, with Qantas announcing it would nearly double the number of Auckland-to--Los Angeles flights from seven a week to 12 a week.
"We would expect to see more and more of this type of activity in the future," Mr Norris said.
In giving the thumbs-down to the planned trans-Tasman alliance, Commerce Commission acting chairwoman Paula Rebstock said it would have substantially reduced competition on routes flown by both Air New Zealand and Qantas, and cost the public $154.5 million a year.
Australian airline, Virgin Blue is aiming to start a trans-Tasman service called Pacific Blue in the near future.
Air New Zealand currently is mainly owned by the Government, which saved it from almost certain bankruptcy last year, when Air New Zealand closed down its subsidiary, Ansett, in Australia.
¥ On the good news front, Dunedin -International Airport is planning a $21.5 million replacement for its terminal building.
Work on a three-stage, three-year development is scheduled to start next August and finish in September 2006.
Airport chairman Richard Walls said detailed design plans were yet to be completed but the concept called for a two-level, 8335sq m terminal facility, which would be used by all airlines and both national and international passengers.