Qantas/Air NZ find hidden hurdle

By NZPA

Monday 10th February 2003

Air New Zealand and Qantas have another regulatory hurdle that has the potential to trip or stall their proposal for a strategic alliance.

Spokesmen for the airlines were unclear of the role of Australia's International Air Services Commission (IASC) which said that as things stand, it was likely to decline the joint operating agreement that is central to the airlines' proposed strategic alliance .

In a letter to the Australian competition watchdog, the Australian Competition and Consumer Commission (ACCC), IASC noted it had yet to receive an application from Qantas to permit Air NZ to code-share on services out of Australia.

It said code-sharing on major routes would raise major competition concerns and it would need to see major public benefits to overcome these.

The airlines propose to combine management of operations in New Zealand and code-share on trans-Tasman and North American routes.

Air New Zealand spokesman Dennis Lynch said it "sounds more an internal Australian situation".

Initially, unaware of the IASC's submission, he denied it was a "curve ball".

"We really don't think they are saying anything that hasn't been said right from the very start. Air New Zealand's position is that it has always said there has to be greater public benefits coming out of this and the whole process is about establishing what these are.

"From what little we can get from the news report, they don't appear to be saying anything that is not Air New Zealand's position all along."

He said it was really a matter for Qantas which has agreed to deal with regulatory issues for both airlines within Australia.

Qantas said it had requested a meeting with IASC some weeks ago and a meeting is scheduled for late next week. Qantas spokesman Michael Sharp said the same issues would be traversed as will be put to the ACCC.

The IASC is an independent statutory authority which allocates capacity to Australia's international airlines, principally Qantas, under bilateral and multi-lateral aviation agreements.

Australian airlines cannot exercise allocated capacity to code-share unless they have authority from the commission to do so.

The IASC and ACCC consult on overlapping competition issues. The ACCC and New Zealand's Commerce Commission will look at broader competition and public benefit issues.

IASC executive director Michael Bird said Qantas may be looking for the green light from the ACCC before approaching the IASC.

He doubted the lack of an application to date was an oversight as he said Qantas was well aware of legal requirements.

Submissions to the Commerce Commission and ACCC on the proposed alliance are due to close this week.

Meanwhile, Air New Zealand today announced plans to ditch its route between Sydney and Los Angeles suggesting a degree of co-operation already between the two airlines.

Flights from Auckland to LA will increase from 14 to 17 per week.

The airline said in a statement today that it would suspend flights from Sydney to Los Angeles from April 27 to concentrate on its Auckland-Los Angeles service.

A spokeswoman would not comment on whether the route was losing money.

"We have not made this decision lightly -- quite simply our service between Sydney and Los Angeles is one of our least profitable," chief executive Ralph Norris said in a statement.

"However, we will continue to monitor the route and, if market conditions improve, we will be prepared to re-enter.

"Meanwhile, the United Airlines withdrawal from New Zealand as from April has opened up additional opportunities for our Auckland-Los Angeles operations."

The looming war in Iraq and uncertainty around approval of the alliance with Qantas had dissuaded Air NZ from bringing additional aircraft to service both routes.

Air NZ's Star Alliance partner, United Airlines, has retained its Australian services and both airlines will continue their code-share arrangement on Sydney-Los Angeles services.

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