It is a nightmare of sorts. Qantas Airways and Singapore Airlines divide the Australasian market between them and Air New Zealand, if it survives at all, becomes a subsidiary of Qantas, probably providing only transtasman and internal services. And quite likely it would be the only provider of those services. Like all nightmares, the proposal announced by Air NZ yesterday seems all too realistic.
The deal, which may well find favour with the airline's major "New Zealand" stake-holder, Brierley Investments, goes to great trouble to preserve competition in the Australian domestic market. Singapore Airlines, having sold its Air NZ stake to Qantas, would buy Air NZ's now wholly owned subsidiary, Ansett Australia. With two strong operators, Qantas and Singapore, in their market Australian competition watchdogs might not raise a growl. But New Zealand's should be barking furiously.
The interests of airline competition in this country and on transtasman routes appears to have been deliberately and cynically ignored by the instigators of the deal. There is still a prospect of a contest in budget air travel if Virgin is given rights to the Tasman, but that prospect remains too vague to offer much consolation. The plans of Qantas to set up as a full service rival to Air NZ on internal routes seemed to be a bird in the hand, well worth the two budget carriers in the bush.
Qantas' plans must now be on hold. If it gains 55 per cent of Air NZ, any competition between the two would be contrived. The deal is merely "conceptual" at this stage, said Air NZ yesterday, meaning there are not yet agreed valuations of the various airline properties on the table. It is a concept that has one or two other awkward details to consider, too.
The sale of Brierley's stake to Singapore would require Parliament to change the law to allow "A" shares in the national airline to be held by a non-residential owner. Brierley may believe it crossed that Rubicon when it moved its own corporate base to Singapore. But Parliament is likely to take a different view.
If the country naively supposed that a home-grown proprietor would safeguard the national interest wherever its domicile, it will not make that mistake now. This proposal reinforces the importance of reserving a portion of the airline to residential shareholders. Nothing else might ensure competition on the routes that are most travelled by New Zealanders. If Brierley now wants out of Air NZ, it simply will have to sell its A shares on the domestic market at whatever price it can get. That is the rule - and there is no reason whatsoever for Parliament to relax it.
Until yesterday, it seemed that the A share restriction would have to be relaxed in order that Air NZ might raise sufficient capital over the next few years to survive as an international competitor in this part of the world. But the proposition outlined yesterday illustrates how slender its prospects of international survival would be if the share restriction were removed.
Brierley's chief financial officer, Andrew Shepherd, emphasised yesterday that the company would not sell at the share's current price (99c until they rose to $1.09 on the announcement of the sale proposal). The Government is thus faced with approving the deal or contemplating Air NZ's future under a reluctant, not to say captive, shareholder. But that is not the Government's problem.
The public interest lies in preserving competition. The Government's role is to see that nothing it does stands in the way of any airline that wants to provide a safe service to the country or within it.
There is an interest, too, in preserving a national flag-carrier, not for sentiment but as a symbol and leader of the country's branded tourism. Qantas could not be expected to give precedence to this country in its marketing.
Nobody, however, should fear that without a so-called national carrier the country would be deprived of service. Where there is profit to be made from a service, there will be a business to provide it.
These are turbulent times for the airline industry. It will shake down into patterns not easily predicted. It is for the Government to keep its eye firmly on what matters most - competition.
<i>Editorial:</i> Competition must be kept in airways
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