Regulators and NZ patriotism seen as key blocks

By NZPA

Tuesday 26th November 2002

The proposed Qantas-Air New Zealand alliance will have to overcome key hurdles in the form of Kiwi patriotism and competition regulators on both sides of the Tasman, Australian media reported today.

The airlines yesterday announced a $NZ550 million deal in which Qantas would buy a 22.5 percent stake in its one-time rival.

The agreement would also involve extensive code sharing and Air NZ managing Qantas flights within, to and from New Zealand.

Both parties took pains to stress that they would remain independent, and that the plan did not amount to a de facto Qantas takeover.

The proposal needs the approval of the New Zealand Commerce Commission, the Australian Competition and Consumer Commission, Air NZ shareholders and the New Zealand Government, which has an 82 percent stake in Air NZ.

The Australian Financial Review (AFR) reported that parochial antipathy to Qantas was looming as a major stumbling block in New Zealand.

Fear of public anger was the reason Prime Minister Helen Clark last year rejected attempts by both Singapore Airlines and Qantas to get a 49 percent shareholding in Air NZ, it said.

"Even if Clark were to recognise that Air NZ would struggle to deliver growth without an alliance partner such as Qantas, she faces a considerable hurdle in winning public support for the proposal," it said.

In Australia, however, the deal was likely to get strong public and private backing from Transport Minister John Anderson as long as it met the regulators' concerns and did not cost Australian jobs.

The AFR's Chanticleer column added that an alliance with Air NZ would see Qantas, which has 80 percent of the Australian market, strengthen its position across the Tasman and close in on its goal in Asia.

"Since terrorists converted planes into missiles last year, Qantas boss Geoff Dixon has skilfully worked through the geo-political disaster in a superbly managed climb to local market dominance, reflected in a record profit in the last half-year report," it said.

"Yesterday ... was the penultimate step in what could be the completion of Dixon's dream of Singapore Airlines taking some of British Airway's (20 percent) stake in Qantas to form an Asian hub."

Subject to the agreement getting regulatory approval, Chanticleer said, "Dixon will add domination of New Zealand, trans-Tasman, Pacific island and trans-Pacific routes to his Australian domestic market stranglehold".

The Sydney Morning Herald said there was no doubt the deal was anti-competitive and would face scrutiny from the regulators, but of more interest was whether it was in the national interest.

On face value, the answer might seem obvious, particularly to New Zealanders, whose national carrier had survived a "narrow brush with corporate death" and was looking at a modest and clouded future.

"Qantas has been shifting capacity on to trans-Tasman and New Zealand domestic routes and maintaining pressure on Air NZ," the Herald said.

"It has the capacity, if not to destroy the Kiwi carrier, to increasingly marginalise it."

ABC Radio reported that, while many New Zealanders regarded the proposal as being detrimental to Air NZ, the biggest stumbling block would still be the regulators.

It said the Government, which spent around $NZ900 million to bail out Air NZ last year, was unlikely to yield to pressure to block the deal on national sentiment alone.

"The Government -- reluctantly -- is Air NZ's biggest shareholder," it said.

"The airline will need more money some time down the track. Better that it is Qantas' money, the Government will figure, than its own."

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