Virgin flying south as alliance stalls

By CHRIS DANIELS AVIATION WRITER

Virgin Blue is poised to announce it will base its New Zealand airline operations in Christchurch.

The Australian budget carrier had been looking closely at Christchurch or Wellington as a base. It is understood to have opted for the southern city.

Its decision comes as the alliance plans of Air New Zealand and Qantas suffered a big setback.

The Australian Competition and Consumer Commission (ACCC) said yesterday that the plan would be "highly anti-competitive and offer no benefit to the Australian public".

Chairman Graeme Samuel said the Tasman route was dominated by the two airlines. Qantas had around 39 per cent of the market and Air NZ around 52 per cent.

Air NZ and Qantas immediately said they would appeal against the decision to the Australian Competition Tribunal and that figures the commission used were out of date.

New Zealand's competition regulator, the Commerce Commission, says it is still on track to deliver its verdict on the plan this month.

Should it also reject it, the airlines may be forced to come up with another plan to satisfy the competition concerns. Air NZ chief executive Ralph Norris said he did not expect the ACCC's rejection to affect the pending decision of the New Zealand authorities.

Air NZ has already spent $11 million trying to get the alliance to fly, and last month said it expected to spend at least another $2 million on the plan.

If approved, Qantas would spend up to $550 million buying a 22.5 per cent stake in Air NZ.

The two airlines would then set up a joint venture controlling all their operations to, from and within New Zealand.

Gerard Murphy, an Auckland travel agent who presented a submission opposing the alliance at the Commerce Commission's conference this month, said the ACCC rejection was "a victory for common sense".

The New Zealand travelling public were better off with Air New Zealand and Qantas as competitors rather than in a "cosy and expensive monopoly". SEE ALSO 'It's time for a new response'