Airline merger blow wins cheers

By GREG ANSLEY Australia correspondent

CANBERRA - Australia's leading business commentators have cheered the Competition and Consumer Commission's rejection of a Qantas-Air NZ alliance, although some fear for the future of the New Zealand carrier.

The decision has also been seen as a king-hit by new chairman Graeme Samuel to stamp his seal as the nation's corporate watchdog, willing to tackle the biggest boys on the block.

"Graeme Samuel probably could not believe his luck when he inherited the Qantas-Air NZ proposal from [former chairman] Alan Fels on July 1," columnist Malcolm Maiden wrote in Melbourne's the Age.

"If there was ever a deal custom-made to show he was no big-business lickspittle, this was it."

In the Sydney Morning Herald, Alan Kohler saw the rejection - supported as it was by the commission's belief in the strength of the two airlines - as vindication of both Air NZ and its chief executive of 18 months, former banker Ralph Norris.

Despite industry fears that a banker would never be able to fully understand aviation, Kohler said Norris had taken the airline from near-death to an "embarrassingly handsome" $147 million profit, even as Air NZ was claiming inevitable demise without a Qantas alliance.

"In fact, it probably doesn't need Qantas any more," Kohler wrote.

The big question was what the decision would mean for the Australian domestic market.

"Qantas and Virgin Blue will now be watching nervously to see whether the banker-turned-aviator and his board decide to do what Air NZ should have done in the first place, which is become a domestic carrier in Australia.

"That's because Air NZ is in danger of becoming a seriously profitable and effective airline."

Air NZ's yield (revenue per passenger kilometre) was 12.3c, against Qantas' 10.7c; Air NZ's $147 million profit was 42 per cent of Qantas' $343.5 million, earned by carrying 38 per cent of the number of passengers Qantas carried; and maintenance costs were lower.

Mark Westfield, writing in the Australian, was more concerned for Air NZ in the war with Qantas that would inevitably follow the decision.

"It will become like its former subsidiary, Ansett Airlines, in 2001. Ansett was squeezed to death in a price war between Qantas and Virgin Blue.

"The competition regulators are unlikely to intervene because discounting is good for consumers, for the invariably short but glorious time that it lasts, and until one operator collapses."

John Durie, in the Australian Financial Review, praised the decision, but said the commission had created confusion by revealing it two weeks ahead of the Commerce Commission.

"The only explanation for Samuel's choosing to make his decision without waiting for the Kiwi response and pretending the two didn't consult was to maximise the impact of his decision," Durie wrote.

"The [NZ] commission is now only relevant to the extent that when Qantas confronts the Trade Practices Tribunal, if the commission does approve the deal this will help its case in the Australian appeal."

Melbourne's Herald Sun said New Zealand taxpayers would pay for their Government's "nationalistic pride" in rejecting a Singapore Airlines rescue offer - Air NZ already wanted an extra $150 million and more would be needed to dodge Ansett's fate.