Qantas, Air NZ Sign Tie-Up as Trips to Down Under Boom

Australia's Qantas Airways Ltd and Air New Zealand announced a codeshare deal on Friday, amid a redrawing of airline alliances in the region as booming tourism lifts carriers on both sides of the Tasman Sea to record profits. The agreement covers 115 domestic routes in both countries, but not the trans-Tasman route where the respective flag carriers compete. It comes as domestic revenues fuelled by fare hikes are driving profits, dividends and stock prices skyward, Reuters reported.

The deal "leverages the strengths we each have in our home markets," Qantas Chief Executive Alan Joyce said in a statement. Air New Zealand boss Christopher Luxon added that the two airlines "will continue to compete across all markets."

Both carriers have been cruising as international tourist numbers touch all-time highs and further stimulate domestic travel by catching internal flights—markets where the pair are entrenched—in both countries. Qantas soared to a record profit in February, while Air New Zealand said it was headed for its second-highest annual profit ever.

  Shift in Alliances

The tie-up also marks a shift in airline alliances as both Qantas and Air New Zealand have dropped or redrawn deals with Persian Gulf carriers in recent months.

Qantas last year said it would drop flights to Emirates' Dubai hub and re-establish its popular Singapore stopover for European flights, while Air New Zealand has ended a 7-year alliance with Virgin Australia Holdings.

It will likely cost Virgin domestic customers in Australia, since passengers flying in with Air New Zealand would now be more likely to stick with its new codeshare partner, Sondal Bensan, an analyst at Qantas' biggest shareholder, BT Investment Management, wrote in an email.

"Good for Qantas, bad for Virgin," he added.

Virgin was not immediately available for comment.

Air New Zealand shares were 4.5% higher at noon in New Zealand and Qantas shares were almost 1% higher in Australia, as both markets fell on Friday. Virgin shares, which are thinly traded and tightly held, dropped 4.4%.