View Full Version : Virgin Blue Formally Opposes Qantas, Air NZ Tie-Up

12th Feb 2003, 15:30
'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;


13th Feb 2003, 21:48
This is typical behaviour of VB.
If even the cost of fuel were to go down Huttner/Godfrey would find something to whinge about!

Which brings up a valid point.
With fuel now at US$37 per barrel and not hedging their fuel costs then VB must be really feeling the pinch.

Expect airfares across the board to rise.

Now thats something to really bitch about!!

13th Feb 2003, 22:04
Maybe Qantas should give Virgin back some of their own medicine and oppose the ADL-BRM flights. No real reason why , but Virgin don't seem to need one.

frank Borman
14th Feb 2003, 00:58
Good on Virgin I say. I think Virgin are doing a smart thing insofar as putting a case to the ACCC so that all the details of the alliance have a chance to be debated. Whats wrong with that?

Yeah so Virgin may be coming across as whinging and whining, but it gets them a result, and it puts another side to the story.

What did Qantas do when poor little Geoff Dixon got scared of the potential Singapore, Ansett, AirNZ tie up? he went and whinged and colluded and did alot of cloke and dagger stuff with the Howard government to actually help put Ansett out of business with the resulting loss of jobs and family's

Virgin make no bones about the fact they are in the press alot. I see that as being more honest and open than Qantas.

14th Feb 2003, 02:22
Pic: Virgin Blue 737-800 VH-VOE on finals rwy 01 BNE.
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


14th Feb 2003, 23:29
Airline Fears Predatory Pricing
14/02/2003 07:11 PM

A company trying to start a new Trans-Tasman airline fears the Air New Zealand-Qantas merger will give Virgin Blue a leg up.

Virgin Blue is opposing the merger, saying it will give its two rivals greater monopoly power.

The budget airline says previous reports into the proposed merger have understated the cons while overstating the pros, and says it should be allowed to get its trans-Tasman service started before any deal goes ahead.

But Lower Hutt based Jumpjet Airlines has told the Commerce Commission it believes Air New Zealand shareholder Singapore Airlines has been offered a part share in Virgin.

Jumpjet Managing Director, Nick Kile says if Virgin Blue breaks into the Trans Tasman market, its predatory capacity would shut anyone else out.

It its submission to the Commerce Commission it says Virgin, Singapore Airlines, Qantas and Air New Zealand between them would be able to exhibit extensive and substantial power in the market and virtually prevent any new entrant from gaining funding support and introduce fair competition.

Jumpjet says it is conceivable that the four airlines are aware of its plans to enter the market and part of their current strategy is to prevent that happening.

Bulletin supplied by IRN Limited Copyright 2001 IRN Limited. All copyright in this bulletin remains the property of IRN Limited. Terms and Conditions.

16th Feb 2003, 05:54
There's a wonderful work of fiction in the form of Virgin's submission to the ACCC available for reading or download from the DJ website. And what a mob of whingers they are! First class cherry pickers if ever there were. Apart from Adelaide/Broome, what have they pioneered? And if they do maintain a monopoly on this route, how long will they last? Anyone can make money operating on prime high density routes but let's see them sink their dosh and tosh into something that's new and requires an investment.

Back to their submission. Aside from some pretty basic spelling mistakes - and they hope to be a credible airline operator - many errors of fact are there to contemplate. I wonder if the AXXX sees beyond their smoke and mirrors. Read for yourselves and then make up your mind as to their objectivity - if it weren't so serious it would be laughable. :rolleyes: :rolleyes: :rolleyes:

16th Feb 2003, 19:46
So let me get this straight.

Virgin Blue want ANZ to divest of their low cost carrier and guarantee that QF will not use theirs on the Tasman?

Gee, that must be really good for consumers, a low fare monopoly.

frank Borman
16th Feb 2003, 22:06
All that aside reggiespotter, it doesn't really matter how many spelling mistakes, or how unproffessional VB look when they submit something, anything that gets submitted to the ACCC has to be taken seriously.Hence thats why it's a good thing that they have submitted at least something to get a balanced look on the whole alliance.

VB havent cherry picked any routes here in Australia. They have just filled a gap that was created when AN fell over. Certain routes here in OZ are some of the most profitable in the world, take SYD-MEL, BNE-SYD, East-West Loco, you may be able to give some back up to that?

If you accuse VB of cherry picking, you also must accuse Impulse of doing the same when they introduced the 717 on SYD-MEL, BNE-SYD.

Like I keep saying, yes, VB may be accused of being whingers and press hounds, but they make no bones about it. Thats more honest than what Geoff Dixon and the Howard governent and Max Moore-Wilton did to Ansett to ensure it would never survive.

16th Feb 2003, 23:42
Thats more honest than what Geoff Dixon and the Howard Government and Max Moore-Wilton did to Ansett to ensure it would never survive.

And what, pray tell was that, Geoff had a commercial responsibility to fight for his shareholders, it's called business and Howard et al had no business in providing CPR to a commercial enterprise.

Where were they when Onetel expired and why should Ansett staff get Government assistance with entitilements and benefits.?

The knock on effects of the HIH fiasco throughout the part of the economy directly affected had a demonstrable effect on the economy at large and make the Ansett staff entitlements look like petty cash.
But then they didn't, but should have had, the ACTU onside and a big fat carcass full of cash, for the Bobsey twins to pick over for the next godzillion years.
Mind you I think the insurance business is a bit too hard for the genii at Trades Hall, money doesn't understand standover "protection" bully boy tactics.

A boring and moronic gaunty.

frank Borman
17th Feb 2003, 01:06
OK boring and moronic Gaunty. I thought we'd buried the hatchet?

You were not directly affected by the AN collapse apart from maybe losing a few FF points. So while you take pride in putting your hard nosed attitude about letting AN fail, think of the families that were affected, including my own, and the families of AN staff and in companies that collapsed as a result of the AN collapse.

The fact is, hard nosed business ethics are yes, by and large, a big part of business, no one including myself disputes that. However, secret colluding and blatant lying is not only ethically wrong, it is illegal. Geoff Dixon writing to the federal government as to the state of AN's financial "slush fund" when he had no idea of it financial state, is illegal and fraudulent.

I take your point of HIH etc, but where does the Howard government get off by spending $600 million farming out so called "terrorist immigrants" around the Pacific islands, when that money could be better spent here, regardless if it's on AN, HIH, Onetell etc etc.

Three years? before AN collapsed it made a $125 million profit. If we had laws similar to whats in the USA with Chapter 11, then we may have a leaner, more efficient AN flying today that probably would of been well on the way to paying back any government assistance and thus saving alot of jobs and families.

Who knows, it's all history and one can speculate, AN RIP. But the fact is, this government is corrupt and it lies to the people that live here and it's in the pocket of big business.

Go and see the movie "Bowling for Columbine" thats out at the moment and you cna draw the similarities between Bush and Howard!!

17th Feb 2003, 03:46

We have and I agree with almost all of what you say.

I am a bit tired of the Cuffes, Trumbulls, whatsisname from BHP, and the other one from BHP/Billiton, Turnbulls, Adler, Rich and the rest of the band et al of this world who either trash companies or do very little in the way of "adding value" and walk away with an obscenely large pocket of cash, leaving the shareholders to pick up the pieces and/or the workers to go on the dole.:O

I would be seriously disappointed and filled with despair were it to prove that Howard is telling lies and in the pocket of big business.

I know power corrupts etc.stc, but I do, or did, not put him in the same league as Hawke or Keating.:{

"Twould be enough to go find me old "cockade", renovate the family guillotine and get me to the barricades.:eek:

17th Feb 2003, 04:57
Frank old boy!

Have seen the movie "bowling for Columbine" but as far as I know the only thing that the Howard Govt and FIRB (foreign investment review board) did wrong was to allow Air NZ to purchase the remaining 50% of Ansett without being able to either really afford it and knowing that they had absolutely no chance of injecting capital for a fleet replacement which was sorely needed.

In my eyes you can level the blame squarely at Air NZ but yes others did play a role.

I dont think the govt should have bailed out AN because they would probably bankrupt the country if a precedent is set.
Should they have supported HIH/One Tel/etc and what is yet to come?

A sad day in the annals of aviation but like many other things in this world it should never have happened.

bitter balance
17th Feb 2003, 06:05
Frank, if Howard is in QF's pocket, why won't he allow QF to increase foreign ownership, something that Geoff Dixon has repeatedly stated is his number one strategic goal?

I have heard plenty of conspiracy theories about the collapse of AN, strangely enough, none of them mention the role that the company played in its own demise.

frank Borman
18th Feb 2003, 02:45
Yep, I'm reading all that you say, and I have no argument, let AN RIP.

Bitter Balance, because Howard is a polster. He like all pollies go's by what the public view is, hence he's been able to survive by cunning for so long.

Besides, I think there is a pretty big case to allow further competition to grow here in Australia when things eventually settle down.

The other thing Bitter Balance is that there has to be justification for everything. I don't think enough justification was presented to increase the foreign investment cap.

At the time QF were looking to lift the cap, they may have been courting Singapore to invest, as SQ's desire was back in 1994. This has certainly been the "dream" of Geoff Dixon to woo SQ into the alliance.You do that, and you lose a big STAR partner in the Asia Pacific region. Maybe the opponents of that were too strong for Howard to ignore. See, we don't know whether he wanted it or didn't. I say he did, but was swayed by outside forces.Nudge wink.

Gaunty, glad the hatchetts buried, gets tiring defending ones point of view.:O

ccy sam
18th Feb 2003, 05:34
Frank, if Howard only goes with the public view[ poll driven], why is He supporting the war against Iraq?

frank Borman
18th Feb 2003, 07:29
Because he's so far up the clacker of George W that when Georgey went for his proctological examination he couldn't get the scope past Howards melon head.

Richard Butler, former UN chief weapons inspector, debated the same thing the other day. This is the first time in Howards political career he has gone against the polls.

I can't answer that one ccy sam, maybe you should email his adviser on the hill, but history does show that this is the first time he's done a backflip.

Maybe because his mate Max Moore-Wilton isn't holding his hand anymore.:eek:

bitter balance
18th Feb 2003, 12:41
Frank, you are forgetting that he campaigned on an extremely unpopular GST platform for the 99 election. The polls didn't support him then either. His support for the Archbishop as GG during the child abuse issue was hardly popular either. Iraq is not the first time for Howard to take an unpopular stance and won't be the last I am sure.

Geoff Dixon has made several good attempts to justify the case for lifting the restrictions on foreign ownership for QF. These are primarily related to capital raising ability in a global market. This is difficult to argue against if the govt has embraced global competition. I can recall Geoff Dixon addressing the Press Club and stating that QF's ability to compete in the future depended on the lifting of ownership restrictions. He was adamant that this was his No. 1 strategic goal. As I said before, if Howard was beholden to QF then the ownership restrictions would have been lifted.

frank Borman
18th Feb 2003, 20:56
Bitter balance, I'll agree with Dixon's capital raising idea after I see his argument for it when his airline has a virtual monopoly in the region. I seem to remember thats the gist of what John Anderson said in defence of knocking it back. Like I said, I suspect Howard was all for lifting the cap, but external influences precluded it.There's alot of memo's in the bowels of Prime Minister and Cabinet that would be worth looking at under freedom of infirmation.

I think it was Paul Keating that initially set up anti-GST sentiment, not John Howard. it was leaked that labor to were going to bring it in, so Howard was no more unpopular than his labor counterpart.

This government makes a public view of saying they embrace competition, the ACCC was brought in by labor? to monitor anti-competitive behaviour. Liberal have ensured that the ACCC is nothing nore than a toothless tiger where mates of the government are concerned. Go figure.

My prediction is watch for further unpopularity of Howard now that his prime wally henchman Max Moore-Wilton is off being just as much a pirate in private enterprise as he was in PM &C.

18th Feb 2003, 20:59
Must admit here it does sound as if VB are a pack of whingers

bitter balance
18th Feb 2003, 23:24
Frank, I can't follow your GST argument. The ALP haven't had the GST as policy since the early 80s when Bob Ork canned it, primarily due to polling concerns. The ALP won the unwinnable election in 93 by running against it. They ran against it in 99. Howard ran for it. I think its pretty black and white which party stood for the GST.

Whether or not QF has a monopoly in Oz (which they don't) means stuff all on the world stage. I believe Dixon's point is that if QF is to compete globally then they must have no restrictions on their ability to raise capital globally.

The ACCC is hardly a toothless tiger. Ask Mayne or any other company that has gone through the ringer with Fells et al. Ask most people in business what they think about the ACCC and you'll get a fairly animated response. If the ACCC was business friendly would the ACCI openly campaign against it?

Whatever conspiracy theories you have about Howard, the fact remains that he didn't back Dixon's call. If he was in bed with QF he would have.

frank Borman
18th Feb 2003, 23:31
Come off it, conspiracy theory? just take a look at the guy and what he's done and the advice he's got from who and attitude of the idiot towards Australian people. The guy is an embarrasment around the world. And it is a well known fact in Canberra as to how far up the coight he is with Not only Dixon, but I believe Margaret Jackson as well.

There is enough evidence around on the guys ways and means. All you have to do is ask staff in his own department.

I'm not having a go directly at you Bitter Balance, but the guy is there by default.

bitter balance
18th Feb 2003, 23:48
Frank, well you need to give me some names to talk to then. Mostly the only people I hear the QF stuff from is ex AN staff who think Howard should have saved the company. My point is, I don't care whether you think he has his head up anyone's arse, his actions do not support the view that he is in bed with QF. It doesn't really matter what side of politics you are on, or whether you think Howard is an idiot etc.

frank Borman
20th Feb 2003, 22:08
Thats understandable from the ex AN staff. His entire actions publically probably don't give weight to his collusion, but why don't you ask Max Moore-Wilton. I think in the public service they have to keep memo's etc for a period of 7 years. Stuff is attainable under the freedom of info act.

The department of PM and C is the melting pot for the governemts decisions. thtas where it's all kept.

A good investigative journo would do well in getting the required stuff. in particular about the meeting/dinner at the lobby in Canberra one fatefull night mid 2001 with Max Moore-Wilton, QF staff and Howard henchmen.