Ex-Air NZ chief warns on Qantas

By FRAN O'SULLIVAN, assistant editor

HERALD INQUIRY - Former Air New Zealand acting chairman Jim Farmer has questioned the morality of rewarding Qantas for its past behaviour with a stake in the national carrier.

Dr Farmer - who led the airline's independent directors during last year's marathon negotiations on a rescue package - has joined the burgeoning ranks of New Zealand businessmen who want a Qantas deal rigorously examined.

He is concerned that Qantas might use a proposed 25 per cent shareholding to block future alliance opportunities that might otherwise be open to Air New Zealand.

The Herald's "Airline Wars" inquiry today reveals strong concerns about the proposed deal from other former directors who served the airline during Qantas' previous period as a shareholder.

Former chairman Sir Selwyn Cushing, former chief executive Jim Scott and former Transport Minister Maurice Williams have decried Qantas' tactics.

They say Qantas repeatedly blocked Air New Zealand's attempts to establish a viable domestic airline in Australia.

Air New Zealand and Qantas have been negotiating for four months, but the shape of a proposed deal has yet to be publicly confirmed.

Finance Minister Michael Cullen says any deal must first get backing from the Air New Zealand board. It must meet national interest criteria and clear regulatory hurdles - particularly competition.

Dr Farmer, who is one of New Zealand's leading competition lawyers and an eminent Queen's Counsel, says some of Qantas' tactics to suppress competition in Australia were believed by many to be "illegitimate predatory pricing practices" directed specifically at Air New Zealand's former subsidiary, Ansett Australia.

Dr Farmer served on Air New Zealand's board from shortly after its privatisation in 1989 until the Government's $885 million bailout.

Since then a new board, under the leadership of chairman John Palmer and managing director Ralph Norris, has been established.

Dr Farmer said that on the face of it Air New Zealand seemed to be making a surprisingly good recovery.

"I have no doubt Ralph Norris has done a tremendous amount to restore morale.

"I valued his support last year and I think he is actually doing a great job now for the airline." Qantas "helping" him is another story.

Air New Zealand's financial position has improved since fuel prices declined and the New Zealand dollar appreciated against the United States currency.

But, notes Dr Farmer: "Clearly competition from Qantas internationally, on the Tasman and increasingly in domestic New Zealand, remains a major problem.

"Establishing a feed out of Australia, which was the motivator for Air New Zealand acquiring a presence in that country, remains a vital interest.

"So it is easy to see why the airline and Dr Cullen would see an accommodation with Qantas as an obvious fix. But is it?"

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