English says advice over Qantas changed in year

Air New Zealand's advisers, Wellington merchant bankers Cameron and Co, last year gave a warning that a buy-in by Qantas could be detrimental, causing price rises and possibly negative effects on tourism.

National leader Bill English said in Parliament yesterday that the report had been written by Murdo Beattie, who had given conflicting advice when advising the Government last year and advising Air NZ this year.

The Government has until December 18 to decide whether to give the go-ahead for Qantas to spend $550 million on a 22.5 per cent stake in Air New Zealand.

Any deal would have to be approved by New Zealand and Australian competition bodies.

Mr English said Mr Beattie, advising Air NZ, had been arguing "the huge public benefit of this deal".

Yet, Cameron and Co had given a warning, in its report to Treasury in June 2001, of "material public detriments" in a partnership between Air NZ and Qantas.

At the time, the proposal was for Qantas to take a 25 per cent stake in Air NZ.

"Last year, Cameron and Co were paid by the Government to say the opposite of what they're saying now," Mr English said.

"Mr Murdo Beattie seems to have some flexibility in his analysis."

Finance Minister Michael Cullen claimed National was "trying to slur Cameron and Co".

He said there was a significant difference between last year's proposal and this one.

"Last year the proposal was for 25 per cent for Qantas and with no other significant New Zealand genuine shareholder.

"And today we're talking about a proposal where the Government of New Zealand would retain 64 per cent control."

The report showed Treasury asked Cameron and Co to provide an analysis covering a number of issues relating to Air NZ including competition and public benefits issues associated with potential Qantas ownership.

Cameron and Co said in its report that potential Qantas ownership could place Air NZ's flag carrier status "at risk".

A single Australasian carrier could have "negative influences" on the New Zealand tourism industry. There were two ways an Air NZ/Qantas merger would affect tourism: disappearance of the Air NZ brand from international tourism markets, and by Qantas - with a mandate to promote Australia - winding down the international business of Air NZ.

The report said while it was unlikely the Air NZ brand would change in the short term, if operational control became "Australian-centric" it was likely that the Air NZ brand would become less important.

Qantas and Air NZ operating as one firm in the domestic market would give them a dominant position, so some price increases would be expected, it said.

Transtasman routes would also suffer a loss of competition.

The combined market share of Air NZ and Qantas was so high there would be at least short-term price rises.

"We consider that there will be material public detriments associated with the proposed partnership between Qantas and Air NZ.

"These detriments result primarily from the loss of competition."

- NZPA