Ministry told of Air NZ talks before election

By VERNON SMALL

The Ministry of Transport was briefed the day before the election on the progress of talks aimed at Qantas taking a slice of Air New Zealand and forming a commercial alliance, papers obtained by the Herald show.

The papers, released under the Official Information Act, reveal that on August 19 Transport Minister Paul Swain was told by Transport Secretary Alastair Bisley of the July 26 briefing.

But Mr Bisley added the ministry had been told since the election that no "final proposal" had been put to the Air NZ board.

In a covering letter Mr Swain told the Herald the proposal referred to would have been from Qantas to Air NZ "not one to the Government".

Before the election, and until the final shape of the deal was unveiled on November 25, Government ministers consistently said they could not debate a possible Qantas buy-in to Air NZ because no detailed proposal had been put to them.

However an October 8 paper to Mr Swain from Deputy Secretary of Air Services John Bradbury outlined the broad shape of any deal.

He said the likelihood of a proposal in the near future was "uncertain".

"Any proposal is likely to comprise the acquisition of a shareholding in Air New Zealand and commercial agreements between the airlines (covering areas such as board membership, facilities sharing and co-operation on capacity and tariff issues)," he advised.

All of those elements were contained in the final deal put by Qantas and Air NZ to the Government.

The papers also show that Mr Swain was told on October 25 by principal legal adviser Hilary Talbot that Qantas' local agent Brian Lockstone had advised the Transport Ministry that the company "intends to shortly lodge an application with the Kiwi Share holder to buy an unspecified number of shares in Air New Zealand".

Mr Lockstone indicated the application would be hedged by a number of conditions.

On December 18 the Government gave its "in principle" approval for Qantas to take a 22.5 per cent stake in Air New Zealand and enter into an anti-competitive deal on domestic and transtasman routes.

Ministers said they had given their approval early, rather than waiting for the Commerce Commission to rule, after taking into account the airlines' wishes not to reveal large amounts of commercial information for months if the Government was going to reject their application.

They also implied that giving the nod on the Kiwi Share "national interest" test would not influence the commission, which ran an independent process. They have pledged not to make submissions to influence the commission.

However the October 8 paper to Mr Swain reveals that officials believed an early "in principle" decision by the Kiwi Share holder would help the Commerce Commission make its decision.

They advised the Government to wait until after the Commerce Commission had completed its considerations before giving clearance.

But they noted: "The parties may however choose to seek Kiwi Shareholder approval in principle at an earlier stage in the process to inform the Commerce Commission. Such a decision could also be helpful for the Commerce Commission's decision-making. For this reason we consider it would be useful for officials to start discussions with the applicants and the Commerce Commission at an early stage of any application."

The commission is due to report by July or August.

The papers released to the Herald were originally due in early December but Mr Swain claimed an extension and released them on December 23.

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