Fran O'Sullivan: Qantas - the hidden agenda

Is the debate over the ownership of our national flag carrier simply a proxy for the real debate we should be having: just how far do we want to get under the bedclothes with our nearest neighbour, Australia?

The business community is humming about the prospect of Qantas getting a cornerstone stake in Air New Zealand.

Every which way the brokers, analysts, exporters, travel agents and companies look at it, there are strong concerns that "merging" the interests of the two major Australasian airlines will diminish competition and raise costs for consumers.

The mounting feeling is quite extraordinary.

Now that Prime Minister Helen Clark's Administration is back in business, it is time for her to spell out whether the Government intends to extract a big profit from its Air NZ investment at the expense of future consumers.

There is real angst among business people that Qantas, having sabotaged the Singapore Airlines-led recapitalisation of Air NZ, now stands to pick up the booty.

A website campaign is being launched to gauge investor interest for an alternative - a major float to provide capital for the airline - and senior businessmen are quietly tackling Cabinet ministers.

Nothing like the extent of this feeling emerged last year during the lengthy negotiations over Air NZ's recapitalisation. Back then you could hardly get boo out of most key participants (unless it was to quietly bucket Air NZ's board for getting into difficulties in the first place).

Ironically, it is the business community which this time round wants to protect Air NZ's ownership from the onslaught of its major competitor, while trade unions like the EPMU are accusing the capitalists of romanticism.

The issues driving business are not purely sentimental. The hollowing-out of the New Zealand corporate sector has seen many large Kiwi firms relocate across the Tasman to be closer to markets.

The New Zealand Stock Exchange successfully fought off a takeover by its Australian counterpart and is endeavouring to expand the capital market here. If Qantas gets a cornerstone stake, Air NZ's future liquidity will be constrained to the disadvantage of potential investors, the argument goes.

Through all this, the Government has stayed remarkably silent.

There was the odd flurry during the election campaign, when, days out from the July 27 poll, National tried to get some traction and make the alleged "done deal" an issue.

Typically for National, it left its run too late, and leader Bill English made an ass of himself by claiming airpoints were for the chop.

But now the election is out of the way, no one can fathom why the Government is not spelling out a broad agenda: are ministers making it up on the fly, or are there strong strategic reasons why Finance Minister Michael Cullen has directed Qantas chief executive Geoff Dixon to talk turkey with Air NZ's Ralph Norris?

Let's hope it is the latter.

For at the end of the day, realpolitik dictates that both Air NZ and Qantas will prove to be little more than stalking horses for the politicians in this affair.

Before the managements and boards of both airlines get themselves in a tizz and remonstrate about the independence of the negotiations, let me make a point.

Ultimately, it is the Governments on both sides of the Tasman which will decide how in practice the competitive framework works for the Single Aviation Market agreement.

This was finally signed in Auckland last week by Acting Transport Minister Judith Tizard and Australian Deputy Prime Minister John Anderson.

It is in the Governments' power to either clear any roadblocks - of which there are plenty - or erect them.

Even opposition politicians are now chiming in, with National's David Carter claiming New Zealanders are going to find themselves rolled by the Australians: "Dr Cullen is proving about as effective with this as Trevor Mallard did with securing the Rugby World Cup."

Act has re-entered the debate. MP Stephen Franks, formerly one of New Zealand's top commercial lawyers and a member of the Securities Commission, got to the heart of the issue on Friday, saying it "insults us all" for Cullen to decline comment on Qantas moves on the grounds that he has not had a formal proposal.

"Mr Cullen should have told Qantas two years ago - and repeated now - that the Commerce Commission will get a 'no way' Government instruction under section 26 of the Commerce Act.

"The 80 per cent owner of a major business should know - and should make sure - that the executives are not wasting their time on a proposal that should never fly."

It is Franks' view that a Qantas presence on the Air NZ board will nobble the airline.

"It doesn't matter how small their shareholding, or how contrived the assurances and conditions. In my long experience as a commercial lawyer, shareholders' agreements were always suspect. They are hard to write and even harder to enforce, and the Commerce Commission would be utterly naive to rely on one."

You would expect Franks to make these points. But where his analysis gets more incisive is over the regional issues which he postulates are driving the Government.

He claims Labour is promoting the Qantas deal to curry favour with the Australian Government by trying to make up the ground it lost for New Zealand through reneging on defence and immigration.

There is strong reason to believe that geopolitical considerations are driving the Government on this score. It acquiesced to the Australian Government's request to let Qantas into the Air NZ negotiations last year to the disadvantage of the Singapore Government, which controls Singapore Airlines.

Cullen has long taken the view that New Zealand is simply a branch economy.

In his trailblazing speech, "Qantas - Facing the Future", Dixon said he was focused on a partnership with Air NZ that would strengthen the international competitiveness of both airlines and improve the region's future in the global aviation industry.

Peter Harbison, of the Asia Pacific Aviation Centre, says the Single Aviation Market has never moved beyond its very early stages - although there are pressures to harmonise the technical and operational regimes.

Harbison finds it hard to justify the continued existence of two independent regimes with a genuinely single market. He points out that Europe has a joint regulatory regime - " the difference is population of some 24 million versus 300 million".

In Harbison's vision (which I suspect is shared by some of those close to the current negotiation), a process should take place to embrace and rationalise relations between Australia and New Zealand through the Single Aviation Market.

This process would take into account Singapore's goals, result in two strong national domestic airlines and address how regional services are dealt with and supported into the future.

If the Government's real agenda is bring Australia and New Zealand closer together - the "two countries-one system" model which former Australian Prime Minister Paul Keating promoted here last year - ministers should declare it.

Dialogue on business

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