Crunched numbers knock alliance

By CHRIS DANIELS and NZPA

The Commerce Commission has recalculated the amount of damage an Air New Zealand-Qantas alliance would do to the economy - and it is worse than first thought.

When the commission rejected the alliance application in April, it said the net detriment to New Zealand fell between $155.7 million and $401.8 million.

The competition watchdog has now added $39.7 million to its lower number and $64.7 million to the top - pushing the total cost of an alliance up into the range of $195.4 million to $466.5 million.

"Importantly, the commission's methodology and assumptions underlying the modelling results, and the model itself, have not changed," says the commission.

The revision came about as a result of an audit of mathematical calculations, taking into account some "technical corrections", it says.

Air New Zealand chief executive Ralph Norris said the airline was surprised at the revised calculations.

"Since the draft determination was released in April, Air New Zealand has disagreed with the Commerce Commission's economic modelling and has worked with the commission following our identification of significant miscalculations."

Norris said the commission's "surprise release" of the revised calculations suggested there continued to be fundamental differences about the correct way to quantify the net public benefits of the alliance.

Air New Zealand's own conclusions would be contained in its detailed submission being sent to the commission next Friday, he said.

The Australian Competition and Consumer Commission said yesterday that the entry of Dubai airline Emirates to the Tasman aviation market was unlikely to bring enough competition to allow the alliance to proceed.

Emirates this week said it would become the third-biggest carrier on the Tasman route once it started flying from Auckland Airport in August.

Senior commissioner Ross Jones told the Australian Financial Review that the Emirates' service, "while desirable, is fairly marginal and probably doesn't have a large competitive impact".

He said entry by Virgin Blue would have a much greater effect on the ACCC's decision.

In this latest round of the submission process, Samoa's flag-carrier, Polynesian Airlines, is the first of the big parties to make its opinion known.

It said recent carnage in the aviation sector throughout the world meant the "anxiety" expressed by Air New Zealand and Qantas about their survivability was well-founded.

"As the sole flag airlines of their respective countries, Qantas and Air New Zealand have recently become extraordinarily dependent upon their domestic markets and both are vulnerable to domestic competition that only targets the high-volume, high-yielding routes that are the airlines' only sources of profits at present," Polynesian said.

Submissions close next Friday, June 20.

Over the following four weeks, until July 18, any interested parties can make cross-submissions responding to issues raised by Qantas and Air NZ in their submissions.

Commission data:

Estimated net public detriment of Air NZ/Qantas deal

* Draft: $155.7m to $401.8m
* Revised: $195.4m to $466.5m