Merger talks collapse, now for cheap fares?

Australia's domestic airline market is geared for a three-way fight for passengers from this Friday, after merger talks between Ansett's prospective owners Tesna and Virgin Blue collapsed.

Virgin Blue's CEO Brett Godfrey has echoed last week's comments by Qantas's Geoff Dixon and agrees that with Ansett's revival there won't be a return to $33 one-way fares, but says that aggressive fare-setting will still be prevalent. Ansett will be under pressure to steal passengers from Qantas rather than Virgin, he said, adding that “they'll have to take some of the pie … they are not going to grow the pie”. Mr Godfrey stated that he didn't believe that a merger between Ansett and Virgin Blue would have worked, as neither party was prepared to cede control and the two companies' cultures would have clashed. It has also been revealed that Ansett intended to cut 1,500 staff to win a majority stake in a merger with Virgin Blue.

Qantas in the meantime is fine-tuning a new advertising campaign in preparation for Ansett's return. Geoff Dixon says that Qantas won't start cutting fares – but it would continue to match prices. He says that Qantas will be “very competitive” against the new Ansett.