Qantas, Air NZ price cap met with derision

By CHRIS DANIELS aviation writer

Promises of a price cap on trans-Tasman fares by Air New Zealand and Qantas have been met with derision from the travel industry.

The airlines have offered the promise of a cap on fares across the Tasman if the Commerce Commission allows them to form an alliance viewed as anti-competitive.

They say they will not increase prices on "regulated city pairs" beyond "airline cost base increases", which would be measured on an agreed producer price index (similar to the Consumer Price Index measure of inflation).

This cap would expire after five years, or if another airline started operating flights on that route.

The Commerce Commission has provisionally rejected the airline's alliance plan as having no benefit for the economy. This week Air NZ and Qantas offered two groups of conditions: the price cap and "capacity floor" - a promise not to reduce flights on particular routes.

Travel Agents' Association president James Langton said there was no way a price cap could be enforced.

Langton said in a single flight on Air New Zealand between Auckland and Sydney a plane had a minimum of nine different fares, with two in business and seven in economy.

The "yield management" systems used by the airlines would make it difficult to monitor and enforce a cap on fares.

"They say they'll cap the fares - they'll say their costs have gone up so they can increase the fares. It means nothing."