Air NZ going to High Court over rejected Qantas alliance

By CHRIS DANIELS and NZPA

Air New Zealand is appealing against the Commerce Commission's rejection of its planned alliance with arch-rival Qantas.

The airline says it will take the matter to the High Court, where it will try to overturn the commission's decision not to permit their alliance.

Airline chairman John Palmer yesterday said the boards of Air NZ and Qantas had reviewed the commission's decision and had "received advice from leading international economists and prominent competition lawyer Jim Farmer, QC, that the commission's determination is seriously flawed and that the factual and economic evidence provide strong grounds for an appeal".

Farmer is a previous chairman and stand-in chief executive of the airline.

"Based upon the strength of the legal advice the Air NZ and Qantas boards received, it would have been negligent for the respective boards not to proceed with an appeal," said Palmer.

A High Court appeal is expected to cost at least $3 million and is not likely to be heard until the middle of next year.

Some lawyers cast doubt on the appeal's chances of success.

John Land, a partner of law firm Kensington Swan, said the commission had made a discretionary decision which weighed the potential benefits and detriments of the alliance.

"That is a fairly complex, and to a degree, subjective exercise that the commission is particularly suited to undertake, and one that the High Court would normally be very reluctant to overturn unless clearly the Commerce Commission had proceeded on some incorrect principle."

Competition lawyer Neil Anderson of law firm Chapman Tripp, which has represented opponents of the alliance, said the principle of "deference" was usually applied by the High Court, meaning the Commerce Commission would be considered an expert body.

It was possible a decision could be overturned if an error in one part of the decision flowed through its deliberations, leading to a wrong decision.

This was a long row to hoe, said Anderson.

Air NZ could be keeping its options open while appealing a similar rejection of the alliance in Australia.

"They may believe they have turned something up in the analysis that they believe is a show-stopper, or secondly they may just as a matter of strategy be holding the door open until such time as the [Federal Competition Tribunal] makes its decision in Australia."

If the airlines were committed to arguing the case in the tribunal, as it appeared, then it would be absurd not to have the case still in play here in New Zealand.

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