Pair pledge open skies

By CHRIS DANIELS

The promises of Air New Zealand and Qantas to Australian competition regulators are like "lipstick on a pig", says Virgin Blue - not enough to hide the fact the airlines' proposal is still a pig.

The two airlines have submitted a laundry list of 10 promises to the Australian Competition and Consumer Commission (ACCC), which they hope will help their alliance plan gain regulatory approval.

They have promised to provide facilities for a new rival - probably Virgin Blue - and have committed themselves not to increase capacity on routes its rival may wish to start flying.

Air NZ is also promising not to use its low- cost Freedom Air planes to squash any rival, saying it will not fly New Zealand domestic routes, keep flying from main centres to secondary airports (such as Hamilton and Palmerston North) and not increase the size of its fleet by more than one new plane a year.

The alliance deal, in which Qantas would buy a 22.5 per cent stake in Air NZ, with all their flights to, from, and within New Zealand run by a central committee, was initially rejected by competition regulators in Australia and New Zealand.

The ACCC was particularly harsh, with its chairman, Alan Fels, saying the planned alliance would be "highly anti-competitive and offer little benefit".

Air NZ chief executive Ralph Norris said the objective of these undertakings was "to facilitate the entry of competition and to address the issue of what has been talked about as monopolistic price increases".

Yesterday's undertakings represented "significant movement", said Norris, which should be enough to address the ACCC's concerns.

Virgin Blue commercial head David Huttner said the complex set of proposals were like lipstick on a pig - not enough to hide the deal's bad points. If adopted, the undertakings would leave the airline entirely at the behest of Air NZ and Qantas - with the inevitable disputes over terminal access, facilities and capacity.

"Who's going to enforce it, be the referee? We'd be in arbitration every month under this proposal,"said Huttner. "It leaves us at the behest of Qantas and Air NZ. We are not saying we want them to help us: we want them to get out of the way."



The simple sale of Freedom Air, which Air NZ says will not happen, would be enough to answer all of Virgin Blue's objections, he said.

Yesterday's undertakings to the ACCC will be included by the airlines in their response to the New Zealand Commerce Commission's draft decision rejecting the alliance plan.

Spokesman for some of the deal's opponents, Infratil executive Tim Brown, said he did not expect the New Zealand commission to be swayed by the undertakings. They simply served to reinforce the anti-competitive nature of the deal, by establishing a voluntary price- fixing arrangement.

"We want a competitive environment that will result in prices moving around to ensure the best deal arises," said Brown.

The more regulations controlling price and capacity, the more likely it was the consumer would suffer.

Another concern was that Air NZ and Qantas were not currently competing as they went through the application process.

Relevant capacities to be agreed upon after any deal would be determined by what was in the market before any approval - namely, an environment where the two supposed rivals are colluding.

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