Ansett woes threaten discount airfare market

The ongoing corporate machinations over the future of Ansett and its parent Air New Zealand threatens domestic airfare competition and the future of Virgin Blue as an independent airline.

The loss-making Ansett has dragged down the performance of Air New Zealand which is seeking NZ Government permission to allow This would make Singapore a 49 per cent shareholder in Air NZ while also a 49 per cent shareholder in Sir Richard Branson's Virgin Atlantic airline, big sister to Virgin Blue.

With Virgin Blue itself looking to raise investment capital from other investors, there have been talks between Ansett and Virgin Blue to bring the two competing domestic airlines together with pressure being brought to bear from Singapore Airlines.

There are reports that Air NZ has put a $250m offer on the table to buy out Virgin Blue.

Although this is against Branson's original aim of making Virgin Blue a viable third airline competitor in Australia, the low-cost airline is feeling the heat from Qantas and says the competition laws are not strong enough to allow it to establish a strong foothold in the market. If Air NZ and Ansett get cashed up from Singapore, Virgin Blue will then have two big rivals trying to squeeze it out of the market.

Meanwhile, Virgin and the Queensland Government are calling on the Federal Government to tighten competition laws before its too late.