Regulators likely to reject AirNZ deal initially - Cullen

By NZPA

Tuesday 11th March 2003

Finance Minister Michael Cullen thinks competition regulators on both sides of the Tasman will initially reject the proposed $NZ550 million alliance between Air New Zealand and Qantas.

As a result, the airlines would probably be forced to give more rigorous undertakings to offset anti-competitive effects in the proposed alliance.

"You can be fairly sure that both of the regulatory authorities' initial conclusion -- I'm pretty sure, anyway -- that the initial conclusion is going to come out negative," Dr Cullen told the Australian Financial Review in an interview.

"I'd be surprised if they don't come out that way, but then I think we'll get to that (in) the second round," he told the newspaper.

The New Zealand Government has given conditional support to the deal, which involves Qantas buying 22.5 percent of Air NZ as part of a wide-ranging strategic alliance.

Dr Cullen said the partnership was crucial to the survival of both airlines, and the national interest case should outweigh concerns about reduced competition on trans-Tasman, trans-Pacific and domestic New Zealand routes.

The Commerce Commission and its counterpart, the Australian Competition and Consumer Commission (ACCC), are due to deliver draft determinations next month.

Dr Cullen said he believed assurances from Qantas chief executive Geoff Dixon that Qantas was not trying to take over Air NZ.

"I don't underestimate the guile and long-term strategic and short-term tactical sense of Geoff Dixon. But I am actually convinced... that he is quite genuine about that the fact that he is concerned about Qantas' long-term future and he sees a co-operative alliance between the two airlines as being beneficial to both.

"He's not trying to swallow up Air NZ; he does not see that as being terribly in Qantas' interest."

Dr Cullen said he saw the deal as being indicative of building a stronger Australasian base for some of New Zealand's major companies.

"The alternative case is an Air NZ which is going to be much more exposed, much more fragile in terms of its long-term viability and we would argue very strongly that's not in the national interest."

The Australian government, through its Department of Transport and Regional Services, has backed the deal, but said it had anti-competitive aspects "that will need to be mitigated by undertakings more substantial than those presently suggested by Qantas and Air New Zealand".

It said the airlines should have to disclose data on traffic to help rival airlines plan competing services. It wants an expiry and review mechanism included.

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