Pic: Virgin Blue 737-800 VH-VOE on finals rwy 01 BNE.
http://www.jetphotos.net/viewphoto.php?id=30705
Photo by Wirraway (Ian Sharp)
"The Australian"
As rivals woo, Virgin blues
By Steve Creedy
February 13, 2003
VIRGIN Blue yesterday called for a three-year limit on any alliance between Qantas and Air New Zealand.
Richard Branson's Australian airline also produced a 40-page economic report that claimed the rival airlines had "substantially understated" price increases and the reduction in flights that would flow from the deal.
Using the analysis by Frontier Economics to back its submission to the Australian Competition and Consumer Commission, Virgin claimed Qantas had also overstated the benefits of the alliance and failed to identify a likely detriment to freight.
It said the risks were such that the deal should not be authorised for more than three years.
Air New Zealand should be forced to divest low-cost carrier Freedom Air, it said. And Qantas should be prevented from using aircraft from Australian Air, former Impulse Airlines or Jet Connect (Qantas' New Zealand operations) on trans-Tasman, New Zealand and Pacific routes.
Virgin said it would enter the trans-Tasman and New Zealand market "with or without the proposed alliance".
The airline, jointly owned by Sir Richard's Virgin Group and Australia's listed Patrick Corp, claimed it could capture up to a third of the market over time, but warned this was put at "substantial risk" by the proposed alliance.
Barriers to building a substantial operation included limited access to facilities and "strategic" pricing and capacity by the alliance.
It said new entrants must be provided with terminal access equivalent to that enjoyed by the alliance, particularly at peak times, and identified Sydney, Auckland and Christchurch as crunch points.
"We believe that, given the right conditions, we can be the same type of competitor (in New Zealand) as we are in Australia," Virgin head of commercial David Huttner said.
"If we don't get the right conditions we're going to nip in and cherry-pick, which means only a limited amount of the market benefits."
The Frontier Economics report was highly critical of analysis done for Qantas by NECG.
"There are many points in the report where the argument is unclear, highly questionable or contradictory," Frontier said.
It concluded that the expected benefits identified by NECG would not outweigh the expected costs.
Frontier and Virgin also doubted the claim that a loss-making price war would lead to Air NZ's demise if the alliance did not go ahead.
"It appears to us to be more of shakedown on Qantas's part," Mr Huttner said.
An ACCC draft decision on the proposal is expected by the end of
April.
============================================