Virgin Blue Formally Opposes Qantas, Air NZ Tie-Up

[Wirraway]

'Dow Jones Newswires'

Virgin Blue Formally Opposes Qantas, Air NZ Tie-Up

BRISBANE (Dow Jones)--Virgin Blue on Wednesday lodged its formal submission with the Australian and New Zealand competition watchdogs opposing the proposed strategic alliance between Qantas Airways Ltd. and Air New Zealand Ltd.
Australia's second-biggest airline alleged that the deal, which involves market heavyweight Qantas buying a 22.5% stake in the New Zealand carrier for NZ$550 million, is anticompetitive and will hurt its operations.

"The proposed alliance removes the head-to-head competition of Qantas and Air New Zealand in the trans-Tasman and New Zealand markets. It also removes head-to-head competition in Pacific markets (which is largely ignored by the applicants)," Virgin Blue said in their 50-page document.

The no-frills airline, which was established by U.K. businessman Richard Branson in August 2000, said the two airlines are relying on Virgin Blue entering these markets to address the anticompetitive element of their proposal.

"With or without the proposed alliance, Virgin Blue will commence on these routes. Critically, the timing and scale of Virgin Blue's entry will depend on the barriers to entry," the Brisbane-based airline said in its submission to the Australian Competition & Consumer Commission and the New Zealand Commerce Commission.

The two main barriers include access to facilities at Sydney, Auckland and Christchurch airports, and commercial agreements for necessary ground support and handling.

There is also the threat of "strategic capacity and pricing conduct" by Air New Zealand and Qantas, particularly through their low-cost airlines - Freedom Air and Australian Airlines.

Virgin Blue claimed Qantas and Air New Zealand "will fully coordinate all their operations, jointly set prices and share profits."

It also alleged that the alliance "raises a substantial risk that Virgin Blue's entry into New Zealand may not be as substantial as it otherwise would be."

Virgin Blue also said in the submission that Air New Zealand should sell Freedom Air to "remove a bullet from the applicants' gun."

Virgin Blue Chief Executive Brett Godfrey had previously expressed interest in buying the carrier.

The Qantas/Air New Zealand proposal should only be approved if Virgin Blue or another airline have already a substantial scale on the trans-Tasman and New Zealand route prior to the proposal coming into effect, Virgin Blue said.

Virgin Blue head of commercial operations David Huttner told Dow Jones Newswires that its two key concerns are the lack of airport access and Freedom Air.

"We've put down some significant conditions which include primary access to key airport facilities in New Zealand," he said.

If these two are addressed, Virgin Blue would reluctantly back the deal.

Qantas declined to comment on Virgin Blue's submission, noting it had only received it Wednesday and was still scrolling through it.
-By Lilly Vitorovich; Dow Jones Newswires;
=============================================


============================================