Air NZ and Qantas try to get merger off ground again

By GREG ANSLEY Herald correspondent

CANBERRA - Air New Zealand and Qantas head to court in Sydney today in a bid to overturn the Australian Competition and Consumer Commission's refusal to allow an alliance between the transtasman airlines.

Their appeal will be held in the Federal Court by a three-member panel of the Australian Competition Tribunal, with hearings set down to continue to May 28.

The panel is expected to reserve its decision in a complex and fraught application rejected last September by the ACCC as highly uncompetitive, and blocked also by the New Zealand Commerce Commission.

Qantas wants to gain a 22.5 per cent stake in Air NZ under an arrangement the airlines say would preserve competition while enabling them to compete in an international market increasingly dominated by fewer, merged, airline groups.

Air NZ told the ACCC that it needed the alliance to survive, and Qantas said the deal was in the national interest by underwriting the longer-term health of the national flag carrier.

The two airlines also hoped their case would be helped by the arrival of Emirates and Virgin.

But ACCC chairman Graham Samuel rejected the argument of national interest, disputed claims that rejection of the proposal would harm the viability of either airline, and said the alliance would decrease capacity and increase fares.

"Qantas is one of the strongest airlines in the world and the alliance would do little to improve its global competitiveness," Samuel said when he announced the ACCC decision.

"Air NZ told the commission ... that even if the alliance does not go ahead it will be competing strongly on the transtasman route in the medium term."

Presiding at the appeal hearing will be Federal Court Justice Alan Goldberg, a Melbourne judge who has been a deputy president of the tribunal since 1988.

Sitting with him will be Melbourne businessman Grant Latta, chief executive of investment manager GCM Corp, and Professor David Round, director of the Centre for Applied Economics at the University of South Australia and a former associate member of the ACCC and the Trade Practices Commission.

The tribunal, operating under the Trade Practices Act, has the power to perform all the functions and exercise all the powers of the ACCC, and can affirm, set aside or vary decisions made by the commission.

It operates through the Federal Court, drawing on a pool of judicial and other members appointed by the Governor-General.

Presidents and deputy presidents must be Federal Court judges, and other members must have expertise in industry, commerce, economics, law or public administration.

The hearings start with opening statements by Air NZ and Qantas and continue on Wednesday with evidence from senior Qantas officials. Air NZ chief executive Ralph Norris and other officers will appear on Thursday.

* Air NZ's court bid to overturn the Commerce Commission's decision is not expected to begin until early July. However lawyers for the commission and airport investor Infratil will be in the High Court at Auckland today, making points on procedural issues such as the admissibility of evidence and discovery of information relating to the case.