Air NZ not giving up on Qantas deal, says Norris

2.30pm

Despite serious hurdles presented by competition watchdogs and the effects of the Sars virus on bookings, Air New Zealand is "a long way off" from giving up on its proposed alliance with Qantas, chief executive Ralph Norris says.

Air New Zealand yesterday asked for more time to persuade the Commerce Commission their proposed alliance will not squash competition.

Both companies' share prices have slumped recently with Air New Zealand's share price tumbling by almost one third in the past month as the rejection of the proposed alliance and severe acute respiratory syndrome (Sars) make their impact.

However Mr Norris said the airlines still thought the proposal was worthwhile.

"This is a very critical decision in regard to Air NZ's future and therefore from my perspective we're a long way from giving it away at this point," he told National Radio today.

Mr Norris said the problems surrounding the proposed alliance and Sars were "mutually exclusive", "so we'll obviously deal with both issues in parallel".

The Commerce Commission and the Australian Competition and Consumer Commission (ACCC) d elivered strongly-worded draft determinations on April 10, saying the proposed alliance as it stood was anti-competitive and would offer little benefit to consumers.

Under the proposal, Qantas would pay $550 million for a 22.5 per cent stake in Air NZ, and the two airlines would coordinate schedules and prices for all domestic flights and international flights to and from New Zealand.

Mr Norris said Air NZ had asked the Commerce Commission for an extension of "some weeks".

"Given that there are significant numbers of questions, in fact over 60 different questions, in different areas posed by the Commerce Commission in their draft determination, we felt in order to do justice to our case we needed a bit more time in order to put that case forward."

Air NZ needed more time, "t o make sure that the view of the Commerce Commission in regard to a number of the determinations that were made in the draft are appropriately corrected".

He would not be drawn on whether a rejigged proposal would include an undertaking to give up it's profitable domestic budget subsidiary Freedom Air. "At this point I don't think there's anything to be gained in talking about potential concessions," he said.

T he commission will decide this week whether to grant an extension.

Meanwhile, Mr Norris said the process in Australia was different.

The airlines have not requested a so-called pre-decision conference with the ACCC -- which allows interested parties to present more arguments -- and the 14-day window to do so after the release of the regulator's draft ruling passed on Thursday.

"There is no ability in the Australian process to seek an extension for additional time so therefore we are in a position where we were not able to rebut the points raised," he said.

T he airlines are now preparing to take their bid for approval of the proposal to the Australian Competition Tribunal (ACT).

I f they appeal to the tribunal in Australia, they can submit changes to the proposal they have put to the ACCC.

Commentators say another factor in the issue is how much pressure the Australian and New Zealand governments -- which both support the deal -- are prepared to exert on their regulators.

- NZPA