Merger would boost long-haul efficiency, says Air NZ chief

SYDNEY - A merger between Air New Zealand and Qantas would enable the airlines to improve their efficiency in the long-haul service market, Air NZ chief executive Ralph Norris said yesterday.

Mr Norris was on the stand for the second consecutive day at the Australian Competition Tribunal as part of an appeal by Qantas Airways and Air NZ against the Australian Competition and Consumer Commission's (ACCC) rejection of their planned merger.

Under the plan, Qantas would buy a 22.5 per cent stake in Air NZ.

When questioned by Noel Hutley, SC, counsel for New Zealand travel distribution group Gullivers Pacific, which is giving a submission to the tribunal, Mr Norris agreed that the long-haul industry was one of Air NZ's primary concerns and said it would become an increasingly difficult market to operate in.

While 75 per cent of Air NZ's assets were tied up in its long-haul business, it provided only 5 or 6 per cent of overall company profits.

"We have a major problem with that business, which we are wanting to resolve," he said. ... The long-haul service market ... is where real changes lie for Air NZ."

" ... the current business model of traditional full-service airlines is seriously flawed."

Air NZ and Qantas were facing increasingly stiff competition from airlines such as Dubai-based Emirates, which was providing a good long-haul product in the short-haul market, he said.

Full-service airline Emirates had the advantage of being able to afford to use more comfortable long-haul aircraft for its three-hour trans-tasman flights, yet keep airfares low, because the maintenance component was being spread over its worldwide fleet.

Short-haul services, such as those used by Air NZ and Qantas for trans-tasman flights, had a more basic standard of quality.

The hearing continues.

- NZPA