Air NZ's arguments under fire

By CHRIS DANIELS

Air New Zealand's reasons for wanting to join Qantas have again been put to the test in the High Court at Auckland, this time by lawyers for the Commerce Commission.

Hugh Rennie, QC, representing the commission, said yesterday that it had spent months on the application, talking to many experts before making its decision.

Rennie also described the changing focus of the airlines as their application made its way through the commission and then on to the High Court.

He said the airline had abandoned its own economic model originally used to support its case for an alliance.

While the airline had changed its approach, events since the commission's rejection of the alliance had only lent more weight to its decision.

Pacific Blue had not expanded at the same rapid rate as was expected last year.

Other developments included Qantas setting up its own low-cost airline, Jetstar. Royal Tongan had failed, while Malaysian Airlines had stopped flying the Tasman route. The growth of Emirates and Pacific Blue had been less than the actual growth in the whole market.

Origin Pacific, which was recently seen as providing competition to Air NZ and Qantas on domestic routes, had nearly collapsed and was cutting services.

On top of all this, the financial health of Air New Zealand had improved.

Qantas wants to buy up to 22.5 per cent of Air NZ for $550 million. The airlines then want to fix prices and co-ordinate services on all their flights to, from and within New Zealand.

Regulators in Australia and New Zealand rejected the idea last year, saying it was anti-competitive.

The airlines are appealing against this decision in the High Court, and are awaiting the result of a similar appeal in Australia.

The case is expected to finish by early next week.