Airline offers fare cap for NZ deal
By Steve Creedy, Aviation writer
May 10, 2003
QANTAS is prepared to cap prices on some routes if the Australian Competition and Consumer Commission allows its $500 million alliance with Air New Zealand to proceed.
The new offer was contained in a submission the airline planned to file with the ACCC last night in an attempt to overturn a draft determination rejecting its bid to take a 22.5 per cent stake in Air NZ.
Details of the filing will not be available until Monday but a Qantas spokesman said the airline was prepared to make "a new undertaking relating to pricing and a stronger and more substantial undertaking relating to capacity, facilities and services".
The pricing undertakings are understood to relate to trans-Tasman or New Zealand domestic routes, where the alliance will hold a monopoly.
The airline is also prepared to extend the timeframes in which its undertakings will apply.
The submission highlights a range of issues, including the effect of continuing problems in the aviation industry on both airlines and the likely contraction of Air NZ's international operations if the deal does not proceed.
It also notes Virgin Blue's intention to enter the trans-Tasman and domestic New Zealand markets and argues "real and substantial benefits" will flow from the alliance.
Qantas had previously offered a conditional moratorium on attacking trans-Tasman rivals, provision of facilities for up to 12 months and a promise not to reduce capacity on monopoly routes for two years.
But the ACCC found the harm caused by the deal's "highly anti-competitive" nature outweighed any benefits from the alliance.
ACCC chairman Allan Fels left little room for further negotiations when he said it was difficult to envisage what further undertakings could be offered to meet the watchdog's concerns.
His remarks were backed up by the New Zealand Commerce Commission, which found the alliance would "likely result in a substantial lessening of competition".
The NZCC calculated the alliance would cost its public up to $NZ401 million ($365 million) in lost productivity and efficiency.
Qantas has asked the ACCC to finalise its draft determination as soon as possible so the airline can, if necessary, lodge an appeal with the Australian Competition Tribunal.
Even if successful, an appeal could delay the deal for up 12 months and federal Transport Minister John Anderson has not ruled out new legislation to push through the alliance.
Qantas and partner British Airways warned in a separate submission that they would probably cut flights on the "kangaroo route" between Sydney and London if the ACCC did not renew a joint services agreement that allowed them to fix prices and share profits.
"Passengers would be denied choice and increased air fares would be inevitable. The proposal would likely result in a substantial lessening of competition in a number of markets."