Air NZ rules out waiver

By Nick Stride

Friday 29th November 2002

Air New Zealand yesterday ruled out a Fonterra-style appeal to the government to bypass Commerce Commission scrutiny of its alliance with Qantas.

"We will not be seeking any form of waiver. We believe the strength of the case speaks for itself," managing director Ralph Norris said.

"The argument here is that the benefits overwhelmingly exceed the detriments."

Air New Zealand will on December 9 present an economic benefits analysis to the Commerce Commission here and the Australian Competition and Consumer Commission.

The deal also needs the government's blessing. A cabinet policy committee last week approved the national interest criteria to be applied to the deal and ministers will decide by December 18.

The benefits analysis has been drawn up by Professor Henry Ergas of Australia's Network Economics Consulting Group.

Professor Ergas has done work for incumbent telcos Telecom and Telstra and is noted for his evolution from competition hawk to competition dove.

It has been audited by PricewaterhouseCoopers and peer-reviewed by "other international economists."

"We do see a competitive detriment and that is quantified within the model," Mr Norris said. "We're talking about net benefits from a public interest perspective of $1 billion over five years."

The report estimates the alliance will bring up to 50,000 new visitors a year to New Zealand.

Mr Norris said that was based partly on an agreement that Qantas Holidays, the largest wholesale provider of tour packages into the region, would in future include New Zealand tour products in its promotions.

He said the creation of "at least 200 new, highly skilled jobs" would result mainly from an agreement giving Air New Zealand further contracts for maintenance of Qantas aircraft.

The extra work would add "a significant amount" to Air New Zealand Engineering's $500 million of annual revenue and would give it the ability to undertake third-party work for which there is at present insufficient demand to justify expanding the workforce.

Other benefits would be better freight services through greater capacity and more convenient connection times, and improved frequency and convenience for travellers, Mr Norris said.

The airlines will also argue other international airlines will constrain them from monopoly-pricing on transtasman routes.

Mr Norris said carriers such as Thai Airways, Malaysia Airlines, and Polynesian Airlines carried about 20% of transtasman traffic between them and "price very aggressively."

While Mr Norris has been quoted widely this week Qantas' Geoff Dixon and Margaret Jackson have been keeping their own counsel.

New Zealand government ministers have kept quiet, too. In May a Securities Commission report found public comments on Air New Zealand last year by Prime Minister Helen were "inappropriate but not illegal."

Treasury advice released this week noted ministers had a difficult line to tread and advised them to limit comments to factual matters in the public domain.

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