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Air NZ agrees to settle cartel case, expects earnings at upper end of guidance

Friday 7th June 2013

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Air New Zealand, the national carrier, agreed to pay $7.5 million to settle a long-running dispute with the antitrust regulator on alleged agreements with other airlines on fuel and security surcharges on air cargo.

The Auckland-based airline is the last of 11 carriers to settle with the Commerce Commission on the air cargo cartel case, and faces the biggest penalty among the carriers if the High Court agrees with the settlement. The deal takes total penalties to more than $42 million, with Air NZ, Qantas Airways and Cargolux International Airlines accounting for almost half of that.

The alleged price fixing has been the subject of antitrust action worldwide, with settlements from airlines in Europe and the US.

The settlement, which was factored into the company's April earnings guidance, avoids further protracted and costly litigation, Air New Zealand said in a statement. The airline has already spent $10 million defending the litigation.

Air New Zealand has continued to perform soundly in stable market conditions and expects normalised earnings before tax to be at the upper end of that range, the company said.

On April 24, the airline said it expects normalised annual pre-tax earnings, which strips outs unrealised movements in derivatives used to hedge its exposures, to be between $235 million and $260 million in the 12 months ending June 30. That compares to the $91 million it posted in 2012, meaning earnings are set to gain by between 158 percent and 186 percent.

Shares in Air New Zealand, three-quarter owned by the government, jumped 2.7 percent to $1.51, and have gained 14 percent this year.

The settlement is subject to court approval with a decision expected within a few weeks, the company said.

Earlier this week, Air New Zealand gave up a last-minute court challenge to stop the settlement.

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