KEY POINTS:
The Australian Competition and Consumer Commission's draft veto of Air New Zealand's planned code-sharing agreement with Qantas should be the end of the matter. The airlines, having been thwarted yet again, should put thoughts of joining forces behind them and concentrate on their respective operations. Yet Air NZ, in particular, seems loath to concede the game is up, saying it was "flabbergasted and astounded" by the commission's decision. If such is the case, it says little for either its perspicacity or regard for the travelling public.
In reality, the code-sharing pact, which would allow the airlines to collude on capacity, scheduling and fares, and carve up revenue on their Tasman routes, differed only in scale from the more formal alliance previously rejected by competition watchdogs in Australia and New Zealand. In either scenario, fares and flight frequency were bound to suffer, given that the two carriers claim 80 per cent of the transtasman market. The ACCC was always going to reject the code-sharing proposal if it maintained a consistent line of thought, a fact acknowledged by Qantas, which said it was not surprised by the verdict.
Indeed, the chances of approval by the Australian watchdog were probably slimmer than when an alliance was mooted two years ago. Then, Pacific Blue and Emirates loomed as potential constraints on the activities of Air NZ and Qantas. Now, there can be no such claim. Pacific Blue has shown only a slight interest in transtasman routes, while Emirates is shackled by landing rights restrictions. It has even emerged that the Dubai-based airline's right to operate in New Zealand is contingent on it "not unduly" affecting Air NZ's interests.
But Air NZ and Qantas were doubtless more confident because the code-sharing plan effectively required the backing of only the ACCC. They had found a way to bypass approval from this country's competition watchdog, the Commerce Commission. Twenty-year-old provisions in the Civil Aviation Act designed to prevent Air NZ becoming ensnared in the Commerce Act meant a decision was handed to the Ministry of Transport, which would advise Cabinet minister Pete Hodgson. This was hardly an arm's-length arrangement, given the airline is 80 per cent owned by the Government. Indeed, with the Government having left no doubts about its desire for closer ties with Qantas, it had all the appeareance of a sham.
The decision by the ACCC has negated the need for that embarrassing process. But only if Air NZ and Qantas are ready to abandon their ill-conceived project. It reflects badly on them that they were prepared to exploit a legal loophole in pursuit of a plan contrary to the interests of passengers. They should now accept the ACCC's draft determination, and take the matter no further.
The omens are not good. Air NZ has already wasted much time and money in its quest to join forces with Qantas. Its railing against the latest setback has included a threat to cut capacity and routes on what it claims is an unprofitable sector. If this is done, it will be a business decision, and one that may encourage Qantas to step up its operations or Pacific Blue to play a greater part.
Above all, Air NZ should be keeping its eye on the bigger picture. On the basis of available seat kilometres, it says that it is growing faster than at any time in the past 15 years. A 9 per cent expansion in services is predicted this financial year. New Shanghai and Hong Kong services are being developed. Its share price reflects an improved outlook. A disregard for its customers' best interests should not be part of its flightplan.
