Airports want regulators to have a look at the Air New Zealand-Qantas domestic code-share agreement to ensure it does not adversely impact Virgin Australia.
And Virgin itself is mulling what steps it could take to push for a possible review of the surprise deal which it says is bad for consumers. The new code-share partners insist it will be good for travellers and regional destinations in both countries in particular.
The Australian Airports Association (AAA) said the arrangement could reduce competition on both sides of the Tasman.
It has called on competition regulators to ensure the new code-share agreement between Qantas and Air New Zealand does not hit the travelling public and Virgin Australia.
When they announced the deal, Qantas and Air New Zealand said it did not need regulatory approval, unlike other deeper relationships airlines form.
Caroline Wilkie, AAA chief executive Caroline Wilkie said the arrangement would lessen competition on both sides of the Tasman, and had the potential to constrain the important trans-Tasman market and impact tourism.
"There are a limited number of airlines operating in both countries, and between them, so it's important there remains a healthy level of competition in the market," Wilkie said.
Virgin Australia's group executive Rob Sharp said he was surprised at the deal, which will start on October 28, the day his airline ends its deeper seven-year alliance with Air New Zealand. The Kiwi airline decided not renew the arrangement.
''This is not good for consumers in New Zealand. We'll compete vigorously, we're a challenger brand and, in due course, we'll be announcing our product and fare structure,'' he told the Herald on the sidelines of the International Air Transport Association meeting in Sydney.
''In terms of the regulatory side, it's a code-share arrangement and they've put their view in the market but we're obviously looking very closely at that.''
The airline has already announced more flights between Australia and New Zealand from later this year.
''What I can say is we're going to compete hard, we're disappointed because it's not a good outcome for consumers and we're obviously exploring what steps we can take next,'' said Sharp.
The code-share announced on Friday is for travel by Air New Zealand and Qantas within each other's domestic networks and not across the Tasman where they say they will continue to compete hard.
The code-share will streamline ticketing, bag movement and give eligible passengers access to both airline's lounges. Details of how frequent flyer points could be allocated when passengers travel on the other airline are still being worked through.
The Commerce Commission said this morning that based on the information available about the code share, it did not currently consider it raised particular issues under the Commerce Act that it intended to look at further.
Qantas Group chief executive Alan Joyce hit back at criticism of the deal by the AAA.
Airlines on both sides of the Tasman have been stepping up criticism of airports and Joyce said it was ironic that ''monopolistic'' airports were criticising the deal.
''These carriers are going to be very competitive and nothing's changed - I only wish airports could be as competitive,'' he said at IATA.
''As we said to Air New Zealand we're going to be 'frenemies' on this one. We're going to be very competitive on the Tasman and domestic New Zealand and all the other routes that we compete on,'' he said.
But it made sense for the customers for the two airlines to code-share.
Jetstar is a Qantas subsidiary and has been flying domestic jet routes in New Zealand since 2009 and regional routes since 2015 but, with limited frequency, has struggled to make a profit here while up against Air New Zealand which has around 80 per cent of passengers and an even higher proportion of revenue.
There have been concerns that the code-share could mean more Qantas passengers will be end up on Air New Zealand flights and Jetstar will find the going even tougher.
Jetstar group chief executive Gareth Evans said it was ''110 per cent'' committed to New Zealand.
''We are fully committed to Jetstar in New Zealand. It is a very important part of the Jetstar jigsaw puzzle and this code-share with Zealand has been designed in such a way that effectively Jetstar is insulated and carved out.''
Jetstar would carry the Qantas code if its flights were timed for around the same time as Air New Zealand services, providing incentive for passengers to stay with it.
Also, there were not a high proportion of passengers connecting from trans-Tasman Qantas flights.
''The vast majority of Jetstar NZ customers are point-to-point customers,'' said Evans.
Rather than pull back from New Zealand, Jetstar would consider expanding if there was sufficient demand and available aircraft, and he and Joyce urged Kiwis to use the airline.
It has been instrumental in pushing down fares across both airlines operating domestically here. In real terms, fares have risen on domestic routes significantly below the rate of general inflation for the last decade.
''We want to make sure that the airports in New Zealand and consumers in New Zealand continue to support our work and that's the best way for us to continue to grow that business.''
Joyce said the code-share would be good for regions in particular as it streamlined travel from places like ''Wagga Wagga to Kerikeri.''
But he too said the best way of strengthening Jetstar in New Zealand was opting to fly on the planes.
''The best way of ensuring their viability is for all the communities to get behind and support them - we brought competition to a lot of regional markets and we have no intention of changing that,'' he said.
''I would say to the mayors in these local towns get behind these services - make sure you support Jetstar the whole hog.''
*Grant Bradley travelled to Sydney courtesy of IATA