"This is effectively going to be one airline. Qantas wants to turn Air New Zealand into a regional branch office. They're not paying out $500 million to sit at the board table and take morning tea. They're coming in to run the place."
Tues "The Australian" 26/11/02
Qantas and Air NZ to join
By Steve Creedy, Andrew Fraser
and Luke McIlveen
November 26, 2002
BUDGET carrier Virgin Blue says it will walk away from the New Zealand market if the planned $NZ550 million ($491 million) alliance between Qantas and Air New Zealand is allowed to proceed.
Qantas has agreed to buy a 22.5 per cent stake in Air New Zealand and form a joint operation across the Tasman and in New Zealand managed by the Kiwi carrier.
The airlines would codeshare on flights to the US and within Australia as part of a five-year agreement that is expected to produce savings of up to $NZ450 million.
The combined group would represent about 4 per cent of global airline capacity, with Qantas flying 197 aircraft to 32 countries and Air New Zealand operating 83 planes to 15 countries.
In New Zealand, the deal has sparked a backlash from parliamentarians, business leaders and travel agents but Prime Minister Helen Clark is expected to push the deal through with a cabinet vote.
Even Miss Clark's coalition partners in the United Future party are upset over the deal.
United Future leader Peter Dunne said Qantas had spent the past 60 years trying to "marginalise and dominate" Air New Zealand. "This is the achievement of Qantas's 60-year campaign to gut its New Zealand rival."
Opposition leader Bill English called the plan "Australia's biggest win over New Zealand", warning domestic and trans-Tasman airfares would rise, hurting tourism and export business.
"This is effectively going to be one airline. Qantas wants to turn Air New Zealand into a regional branch office. They're not paying out $500 million to sit at the board table and take morning tea. They're coming in to run the place."
Virgin chief executive Brett Godfrey called on the Australian Competition and Consumer Commission to block the deal.
The commission is concerned the Qantas-Air New Zealand alliance would tie up 63 per cent of flights to the US from the South Pacific and dominate the Tasman and New Zealand. The nearest rival, United Airlines, holds a 23 per cent share of the market.
ACCC chairman Allan Fels said: "The proposal immediately raises concerns for the ACCC.
"Today's announcement appears to include strong elements of anti-competitive arrangements including price-fixing and route-sharing."
Transport Minister John Anderson said yesterday he supported any move to strengthen the aviation industry. But he said the proposal would need to demonstrate significant public benefit and not lead to anti-competitive behaviour or stop other airlines from operating on the same routes.
The ACCC will not reach a decision on the proposal for at least six months.
Qantas and Air New Zealand say the deal has strategic benefits to both airlines.
Qantas chief executive Geoff Dixon said he expected the deal to result in job growth in Australia and said it would not raise prices. He said Qantas would "get on with our life" if the alliance were rejected.
"But we don't think it should be," he said. "If people want a strong trans-Tasman and regional airline grouping, I think they'd be very well advised to have a good look at this because the industry's changing dramatically around the world."
Labor's transport spokesman, Martin Ferguson, said Qantas and Air New Zealand had to guarantee the alliance would not result in a loss of jobs or passenger services.
The New Zealand Government has said it would not interfere with an investigation by the New Zealand Commerce Commission.
Last edited by Wirraway; 25th Nov 2002 at 17:38.