Fri "Melbourne Age" 4/4/03
Air NZ to lose Freedom for staying with Qantas
April 4 2003
By Geoffrey Thomas
Perth
Air New Zealand will be forced sell its low-cost subsidiary Freedom Air and make available check-in facilities at Auckland Airport to Virgin Blue to gain regulatory approval for its proposed equity tie-up with Qantas, industry sources claim.
These are two of the concessions expected to be outlined when the NZ Commerce Commission and the Australian Consumer and Competition Commission release draft determinations on April 10.
Last November Qantas and Air New Zealand struck a $NZ550 million ($A505 million) deal for Qantas to take 22.5 per cent of the New Zealand airline.
The NZ Government, which encouraged the deal, gave its tick in December triggering the first (4.99 per cent) of three purchases of new shares in the form of redeemable convertible notes.
However, the deal was seen by regulators to largely eliminate competition between Australia and New Zealand.
Virgin Blue, which had previously hinted its intention to fly between the two countries, said it would not operate services if the merger went ahead.
However, the airline has modified its position to a demand that Air New Zealand divest itself of Freedom Air, which operates from regional centres in New Zealand to Australian cities on the east coast.
Competition regulators are also expected to accede to Virgin Blue's request that Air New Zealand not be permitted to start another low-fare airline for three years, and must give up some check-in counters at Auckland Airport.
JBWere airline analyst Peter Sigley says that the deal will go-ahead. "There is the political and economic will to make this happen," he said.
Qantas and Air New Zealand have pleaded that while their equity alliance does eliminate competition on some routes, it will bring combined economic benefits to Australia and New Zealand over five years of $1.57 billion.
Qantas shares lifted 8¢ yesterday to $3.15.
- West Australian
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Pic: Freedom Air 737-300 ZK-SJE on final to rwy 01 BNE
Photo: Wirraway
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