Door to Air NZ-Qantas alliance plan closing fast

By CHRIS DANIELS

Although the door remains ajar on the Air New Zealand-Qantas alliance plan, it appears to be closing fast, with the scheme again failing to impress Australia's competition regulator.

The two airlines will now appeal to the Australian Competition Tribunal after the Australian Competition and Consumer Commission yesterday rejected the alliance plan as anti-competitive and of no benefit to consumers.

Options for the carriers are more limited on this side of the Tasman, should the Commerce Commission also reject the alliance.

Acting chairwoman Paula Rebstock said yesterday the commission was still on track to deliver its decision by the end of the month.

She said agencies on both sides of the Tasman had managed their processes independently from each other and each agency made its own decision.

Australia's Competition Tribunal is a federal review body which can perform all the functions and exercise all the powers of the lower ACCC. It has the power to affirm, set aside or vary the decision.

Air New Zealand chief executive Ralph Norris said he was disappointed at the rejection, but he had always expected to take an appeal to the tribunal. The airline had been given more opportunity to argue its case before the New Zealand Commerce Commission.

"The NZCC process did give us an opportunity to exhaustively canvas the issues that had been raised in the original draft determination. I believe we were able to validate the arguments we proposed in the original application.

"If the alliance doesn't get up, we have to seriously consider what the shape of this airline is going to be in three to five years' time."

Norris said the process at this stage could run for another nine to 12 months. He could not say if the Australian appeal would continue should the New Zealand Commerce Commission also reject the plan.

Debate at the Commerce Commission's recent conference on the alliance centred on the impact of arrival of Virgin Blue, which is expected to announce this week that it will set up its New Zealand operations at Christchurch Airport.

When the alliance plan was first rejected by regulators in April, there was still doubt about Virgin's intentions, with some wondering if it would ever fly to New Zealand when it still had room to grow in Australia.

If the New Zealand Commerce Commission approves the Air New Zealand deal, then opponents will appeal the decision to the High Court, saying the process it used to decide the applications was unfair.

Led by airport investment company Infratil, the opponents say that the two parts of the alliance plan -


the Qantas purchase of an equity stake in Air New Zealand and the development of an anti-competitive arrangement - should have been decided separately.

Air New Zealand and Qantas, if they meet with rejection on both sides of the Tasman, are thought to be more likely to put together a new version of an alliance plan, rather than trying to appeal it further up the judicial chain.

A challenge for the Government should the alliance be rejected will be Air New Zealand's need for new capital.

The airline is next week taking delivery of the first of its 15 new Airbus A320 planes for use on the Tasman and Pacific Islands routes.

It is studying proposals for replacement of its long-haul fleet of planes, with sales representatives from Boeing arriving this week to promote their new planes.

Air New Zealand talked this year of a rights issue designed to raise $200 million.

A Qantas purchase of 22.5 per cent of Air New Zealand shares would bring $550 million to the airline.

Gerard Murphy, an Auckland travel agent who presented a submission opposing the alliance at the Commerce Commission's conference this month, said the ACCC rejection was "a victory for common sense".

The New Zealand travelling public were better off with Air New Zealand and Qantas as competitors rather than in a "cosy and expensive monopoly".