Jim Eagles: Let's look beyond dying air pact

COMMENT

The proposed alliance between Air New Zealand and Qantas is not just mortally wounded but about to be buried.

As expected, the Australian Competition and Consumer Commission yesterday banged a very large nail into the plan's coffin.

It will be surprising if the Commerce Commission does not whack in another at the end of the month.

Barring some last-minute miracle the alliance is now - in death-row jargon - a dead man walking.

The time has come to look beyond it.

The alliance is so blatantly anti-competitive that its rejection by the ACCC can hardly have come as a surprise.

Indeed, for some months now I have assumed the whole exercise to be a cunning scheme to buy time for Air NZ to prepare for renewed competition with Qantas.

It has used that breathing space wisely. The low-cost Express service is running domestically.

The Tasman Express version is poised to begin within two months and cut-price subsidiary Freedom Air is stronger than ever. Long-haul strategy is now under scrutiny.

As a result Air NZ now looks well-placed to survive in the short-term ... and that's about as much as anyone can expect in a volatile industry like aviation.

There are only two immediate worries.

The first is how to replace the $550 million Qantas was going to invest.

The Government having burned off alternative investors like Singapore Airlines, the obvious option is a rights issue with the state agreeing to pick up its share of the burden.

Sure, that would require a discount, but after all Qantas is paying only 44.5c a share, amounting to a discount of about 20 per cent.

The second is the threat of vicious competition. If Qantas repeats its earlier tactic of running aircraft half-empty and at below cost on domestic and transtasman routes it could certainly damage Air NZ.

But if that sort of behaviour is allowable under the anti-competitive practices section of the Commerce Act then, frankly, the act needs to be strengthened.

That's the sort of thing the Government should be looking at now rather than continuing to promote the alliance.

There's not much point trying to breathe life into a bullet-riddled corpse. But there is plenty to be said for providing a bullet-proof vest to give Air NZ a fair chance of surviving any transtasman assassination attempts.