Decision day on Qantas-Air NZ deal

[Wirraway]

Tues "Melbourne Age"

Early decision day on Qantas-Air NZ deal
By Scott Rochfort
Sydney
September 9, 2003

Qantas shares climbed to a five-month high yesterday on the faint hope that the Australian Competition and Consumer Commission will have a sudden change of heart this morning and approve the airline's proposed $550 million alliance with Air New Zealand.

The announcement represents a big test for the ACCC's new chairman, Graeme Samuel, and comes three weeks earlier than expected.

Five months ago, Allan Fels, Mr Samuel's predecessor, labelled the deal as "highly anti-competitive" and said there was little Qantas or Air NZ could do to get the alliance approved.

Qantas shares rose 4¢ to $3.52 yesterday. Some investors are hoping that, with Emirates starting services on the trans-Tasman route and Virgin Blue planning to do likewise, the regulator will be swayed in favour of the deal.

Mr Smith's price target on Qantas is $3.70 a share and $4.20 if it secures a 22.5 per cent stake in Air NZ as proposed.

There have also been reports that the New Zealand Commerce Commission has softened its stance on the deal.

Even so, some analysts interpret the ACCC's early announcement as a move to quash any hopes for the alliance.

"It will be a little embarrassing to CER (Closer Economic Relations) if New Zealand gives the nod and Australia doesn't, especially when the governments on both sides of the Tasman are supportive of the deal," said Citigroup Smith Barney transport analyst Jason Smith.

If rejected, Qantas is expected to appeal against the decision at the Federal Court-administered Competition Tribunal, which could drag the process out until mid-2004.

Despite Air NZ recently posting its first full-year profit in four years and being in its best ever financial shape, the airline's chief executive, Ralph Norris, has maintained his line that the deal is necessary for his airline's long-term viability.

In April, the ACCC said the alliance would not only stifle competition on flights to New Zealand, but deter Air NZ from competing on routes to the US.

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[Hellsbells]

And it's the thumbs down from the ACCC. Any appeal is likely to take up to 10 months and the Qf share price is down 12 cents with AIZ losing 8 cents.

[Lake Moondarra]

ACCC rejects revised Qantas, Air NZ bid
Qantas has failed in its second attempt to win support from Australia's competition watchdog over its plan for an alliance with Air New Zealand.

The Australian Competition and Consumer Commission (ACCC) has announced it sees no reason to change its original position on the proposed deal.

The ACCC said in April the plan was anti-competitive, would lead to higher prices and reduced services across the trans-Tasman route.

Qantas says it is reviewing the determination to frame an appropriate response.

But it says that might include the possibility of an appeal to the Australian Competition Tribunal.

Qantas wants to buy a 22.5 per cent stake in Air New Zealand, with both airlines saying it will bring cost efficiency during a difficult time in the aviation industry.

New Zealand's competition watchdog had also already rejected the original bid.

The airlines would need the support of both competition regulators for the deal to proceed.

Qantas shares had fallen 12 cents on the Australian Stock Exchange to $3.40 shortly before 11:00am AEST.

That is a decline of almost 3.5 per cent.

[Macrohard]

Qantas alliance with Air NZ ruled out
September 9, 2003

AUSTRALIA'S competition watchdog on Tuesday rejected a proposed alliance between Qantas Airways and Air New Zealand, ruling it was not in the public interest.


Graeme Samuel, chairman of the ACCC.


"The proposed alliance would be highly anticompetitive and offer little benefit to the Australian public," Australian Competition & Consumer Commission Chairman Graeme Samuel told reporters.

The two airlines said last November they would seek clearance from regulators in both countries for Qantas to buy a 22.5 per cent stake in Air New Zealand, injecting NZ$550 million into the ailing carrier.

The stake would have given Qantas two seats on Air New Zealand's board and let the companies combine some of their operations. Air New Zealand would also get one seat on the Qantas board.

Rival airlines, industry analysts and air freight companies criticized the plan, saying it would stifle competition. They said it could enhance Qantas' dominance of the Australian market and create a virtual monopoly in New Zealand and on services between the two countries.

The Australian regulator and its counterpart, the New Zealand Commerce Commission, both rejected the merger in draft rulings in April.

They said then that the merger as it had been proposed was anticompetitive and could lead to higher airfares and freight costs. They asked the airlines to present new arguments and plans.

In May, the two airlines announced new concessions including capping some airfares on routes between Australia and New Zealand and allowing a new entrant, mostly likely budget carrier Virgin Blue, "unimpeded access" to the market between the two countries and to the New Zealand domestic market.

The New Zealand competition watchdog is due to issue its final report later this month.

The New Zealand Government acknowledged industry concerns but had backed the deal, saying it was necessary to secure the local flag carrier's long-term viability as an international airline.

Air New Zealand almost collapsed in 2001 but was bailed out by the Government, which now owns 82 per cent of the carrier.

Full business coverage on Finance.news.com.au

Agence France-Presse

[Bankstown]

http://www.qantas.com.au/regions/dyn/au/publicaffairs/details?ArticleID=2003/sep03/2958 (Qantas Media Release)

Qantas Disappointed with ACCC Final Determination
SYDNEY, 9 September 2003

Qantas said today it was extremely disappointed in the Australian Competition and Consumer Commission's decision to reject its proposed alliance with Air New Zealand.

The Chief Executive Officer of Qantas, Geoff Dixon, said it was particularly disappointing that the ACCC had not properly taken into account significant additional information and expert evidence that had been provided to the ACCC following its draft determination in April 2003.

"There has been a stark contrast between the process followed by the New Zealand Commerce Commission and that followed by the ACCC," Mr Dixon said.

"Last month, the New Zealand Commerce Commission held a six day public forum to hear evidence in person from interested parties and to examine new evidence submitted after its draft determination in April.

"This was an extremely informative week that, we believe, resulted in the New Zealand Commerce Commission gaining a much better understanding of the rationale for the Qantas/Air New Zealand alliance.

"The ACCC took a very narrow view of competition and consumer interests in its April draft determination, either ignoring or underestimating the significant structural challenges facing airlines around the world.

"This approach has continued, with the ACCC not adequately considering the significant further changes in our industry, including in our region, over the past five months."

Mr Dixon said Qantas was reviewing the lengthy Determination in detail to determine the appropriate response, including the possibility of an appeal to the Australian Competition Tribunal.

Issued by Qantas Corporate Communication (2958)
Email: [email protected]

[stillalbatross]

Wirraway, From reading the stark merchant bank (KPMG?) report into Air NZ it still needs a huge investment to make it competitive long haul so I can't see any reason why Qantas can't bide their time and slowly erode ANZ's market share instead. The NZ Govt won't want to pump money into it again and Qantas will pick it up for a song when the next capital injection rears it's ugly head.

I'd say that Qantas will have it in a year or two anyway.

[Wirraway]

NZPA "Dominion Post"

Aussie watchdog shoots down airline merger
09 September 2003

UPDATED REPORT

The proposed alliance with Qantas that Air New Zealand claims is vital to its survival was rejected by the Australian competition watchdog today.

The Australian Competition and Consumer Commission (ACCC) said in a surprise announcement today that it opposed the alliance.

The ACCC had been expected to delay its decision until the Commerce Commission made its announcement later this month.

The commissions on both sides of the Tasman said in draft determinations in April that the airlines were unlikely to be able to ally the threat to competition such an alliance would pose.

Since then Virgin Blue has firmed up plans to fly across the Tasman, before Christmas if possible, and advertised for New Zealand flight crew during the weekend.

There had been speculation that that, along with the arrival of several other international airlines, would be enough too increase competition if the alliance proceeded.

Air NZ's shares, which gained more than 30 per cent in under two weeks on speculation the commission would approve the alliance, plunged as soon as the announcement was released.

By 12.35pm Air NZ shares fell 6c to 54.


The alliance has been publicly supported by Air NZ majority shareholder the New Zealand Government, and the Australian Government.

However, it had to gain approval from the competition commissions on both sides of the Tasman.

New Zealand's Commerce Commission said yesterday it would still release its decision at the end of the month, although it has not specified a date.

The commission held a six-day hearing in Wellington last month to hear further submissions from the airlines and other parties.

Virgin Blue's head of communications and strategy David Huttner said the scale of its operation, which would be used to fly trans-Tasman and domestic flights, would depend on the Qantas-Air NZ alliance.

Virgin Blue was "relatively close" to reaching agreement with Qantas and Air NZ on outstanding issues.

Air NZ dominates the domestic New Zealand market, with about 70 per cent market share.


"The proposed alliance would be highly anti-competitive and offer little benefit to the Australian public," ACCC chairman Graeme Samuel said today.

Mr Samuel said the ACCC did not believe there was any good reason to depart from its view expressed in a April draft determination.


Asked if Air NZ would struggle as a result of the decision, Mr Samuel said Air NZ stated last week it saw itself as a viable airline well into the future.

Asked about whether the ACCC would revisit it, he said not in the short term.

The ACCC could revisit the matter in the future if the applicants approached it with a revised proposal, and the market dynamics significantly changed.

Qantas chief executive Geoff Dixon said that ACCC's decision to reject the proposed alliance had not properly taken into account significant additional information evidence since April.

"There has been a stark contrast between the process followed by the New Zealand Commerce Commission and that followed by the ACCC," Mr Dixon said.

Qantas was considering an appeal to the Australian Competition Tribunal.

"The ACCC took a very narrow view of competition and consumer interests in its April draft determination, either ignoring or underestimating the significant structural challenges facing airlines around the world."

Air NZ has also said it would consider appealing if the alliance was turned down.

Air NZ managing director and chief executive Ralph Norris said it would join with Qantas to apply for a review of the ACCC decision.

Mr Norris said the decision was not unexpected, and he did not expect it to influence the New Zealand Commerce Commission (NZCC)'s decision.

"Notwithstanding today's decision from the ACCC, I remain as convinced as ever of the need for a strategic alliance between Air NZ and Qantas to ensure both New Zealand and Australia retain the critical infrastructure both airlines provide their respective countries' economies," Mr Norris said.

Finance Minister Michael Cullen said the ACCC's decision was disappointing, but not unexpected.

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[Raider1]

Air New Zealand left on their own. What a shame

[pullock]

Air New Zealand left to die on it's own......it's carma hey bro!!

[hoodooguru]

I hope ANZ get a big taste of their own medicine and go under. A very likely situation. That would be justice for the way they left Ansett to sink and blamed everyone else. Godd on the ACCC.

[TIMMEEEE]

With the NZ govt still owing 82% of Air NZ I doubt they will go under but at the same time the NZ govt will feel the strain at having to support it.
Now QF will undercut Air NZ and JetConnect will be its tool for that purpose.

As a good mate of mine that does alot of business in NZ said "It's the kiwi mentality."
They could have had their cake and eaten it if they let the Singaporeans buy up to 50% of Air NZ and now they will be struggling harder and the govt will have to put its hands in its pockets even more when things get tough - and it will.

If Virgin get a stranglehold then the position of Air NZ will be serious.

[raft rower]

I bet Helen Clark rues (or should I say Roos) the day she blocked SQ from coming in and helping out.