A proposed alliance between Air New Zealand and Virgin Blue is expected to intensify competition on the trans-Tasman air route.
The airlines are seeking regulatory approval to collaborate on routes, products, code-sharing and frequent flyer benefits.
Virgin Blue says the resulting lower costs will keep a lid on fares, while Air New Zealand says they could fall by up to 20% and force competitors to lower their prices.
Air New Zealand chief executive Rob Fyfe says the alliance would make the trans-Tasman route more profitable for both airlines by bringing tens of thousand of extra travellers to New Zealand.
Mr Fyfe says an alliance could mean that the average ticket price could be reduced by about $30 and lead to more routes from New Zealand provincial centres.
In 2003, a proposed alliance between Qantas and Air New Zealand was rejected by competition regulators and the High Court because both airlines were considered too dominant on the trans-Tasman route.
Australia's regulator also turned down a similar deal between Air New Zealand and Air Canada on flights between Australia and New Zealand.
Aviation consultant David Stone believes regulators are likely to view the Air New Zealand-Virgin alliance more favourably, but there would be implications for main rival Qantas and subsidiary Jetstar.
The alliance could prompt Qantas to expand its operation in New Zealand.
It is estimated Air New Zealand has about 38% of the trans-Tasman market, Qantas and Jetstar about 32%, and Virgin Pacific Blue about 18%.
