Air New Zealand and Qantas merger returns to court

By CHRIS DANIELS

The long, drawn-out fight by Air New Zealand and Qantas to form an anti-competitive alliance goes into the next round at the High Court in Auckland today.

Qantas wants to buy up to 22.5 per cent of Air NZ for $550 million. The carriers wanted to then jointly control all their flights to, from and within New Zealand.

An Air NZ lawyer told the Australian Competition Tribunal that the combined market share of the alliance would be around 60 per cent on the Tasman.

It would be 100 per cent on direct flights between New Zealand and North America, where only Qantas and Air NZ fly.

This plan was comprehensively rejected by competition regulator the Commerce Commission last year, but the airlines are appealing this to the High Court.

During the next four weeks, Air New Zealand will be arguing that the Commerce Commission, with all the evidence that it was presented with, simply made the wrong decision when it rejected the application.

It will also say that events after this application make its case more convincing.

Opponents, including the Commerce Commission and airport investment company Infratil, are likely to argue that such evidence should be presented to the Commerce Commission in a new application, not to the High Court.

They will argue that the Commerce Commission is the legally established "expert body" in these things, and that if the relevant markets had dramatically changed since last year's decision, then the proposal for an alliance should be re-submitted to it.

Air NZ used the potential impact of Virgin Blue as one reason why it should be allowed to join with Qantas. Virgin, flying under the name Pacific Blue, has made little impact on the Tasman since it began flying last year. It has yet to start flying from Auckland.

Its opponents will charge that by remodelling its own short-haul operations, Air NZ has successfully seen off the threat posed by low-cost carriers.

Air NZ will no doubt point to the impact of Emirates. The Dubai-based airline recently showed its commitment to the New Zealand market by signing up as Team New Zealand's main sponsor for the America's Cup challenge.

What may put a spanner in the works is a decision from the Australian Competition Tribunal, which last month heard Qantas mount a similar appeal against last year's rejection of the plan by the Australian competition regulator.

The whole alliance needs approval on both sides of the Tasman.

An approval from Australian competition regulators, for example, but not in New Zealand would not be enough to allow the airlines to set up the deal.