Editorial: Tasman deal must benefit air travellers

Photo / Mark Mitchell

Beware of competitors bearing gifts. In this case, airlines claiming benefits for passengers if they are allowed to collaborate and divvy up their business on popular routes.

Air New Zealand and Virgin Blue, with a combined 55 per cent of the traffic across the busy but marginally economic Tasman, want regulators to let them join forces against Qantas and its subsidiary Jetstar, which account for much of the rest.

For years, the Tasman has been a challenge for the New Zealand airline, which is profitable from other operations and has the inestimable comfort of Government ownership and effective guarantee from failure.

Air New Zealand has twice sought to join arch-rival Qantas, once in a formal alliance, once, like now, as part of a codeshare arrangement - and twice been refused.

Court or regulator concerns then centred on those two airlines commanding 80 per cent of the Tasman market and the inevitable restricting of both competition and customer interests.

The Air New Zealand and Virgin Blue plan is a more modest affair, yet it mimics the second Qantas-Air New Zealand proposal in allowing the companies to book passengers onto each other's flights, share revenue and collude on capacity, scheduling and fares.

To listen to the airlines it is all upside, for them and passengers. There is talk of lower average fares - with those at the top end somehow coming down - more convenience through staggering flight times across the day and even the possibility of more seats as the seamlessness of the two networks encourages more travellers their way.

Should the arrangement be approved, it is hard to predict the effect on travellers' loyalties. Tickets will apparently make clear which carrier a passenger will end up on. Virgin Blue customers may be relieved to be upgraded from their "character" flights to an Air New Zealand service.

Devotees of the Kiwi flag carrier might not feel the same in reverse, going from a putative full-service airline to a quirky upstart. If the codeshare deal ends up equalising their in-flight offerings then what does that say about each of their brand promises?

Strip back the airlines' intentions and there is an unspoken acknowledgment that these two cannot satisfactorily compete.

They are asking Australia's competition watchdog and - through an unfortunate vagary of aviation policy - the Ministry of Transport here to approve a cosy new arrangement that would, remember, take care of just over half the market.

Seldom does a reduction in competition improve competition. Last time it was the Australian regulator that called a halt to the plan. It will again be the critical authority, given that the New Zealand decision rests with a ministry reporting to a minister of the Government that owns 75 per cent of Air New Zealand.

The airlines say they would not have negotiated and announced their plan if not confident of approval. Air New Zealand already paints the Qantas and Jetstar operations as "the Qantas Group's two-airline move for regional dominance".

It may be that this alliance will even up the contest into a bloc-versus-bloc battle. It is naive to think that the Australian duo have not attempted to maximise their gains on the Tasman market.

But at times like this, as two groupings threaten to dominate the market, the travelling public should be vocal in demanding real choice.

Outsiders such as Emirates Airline, treated by Air New Zealand and some in the Government transport bureaucracy with suspicion, will become ever-more important in keeping the big blocs honest.

The question regulators must address on the alliance application is whether it would be detrimental to competition and the travelling public. They need to be rigorous in defending the public interest, not just airlines' bottom lines.