Air NZ slams Commerce Commission for "capricious" air cargo cartel case

Wednesday 28th September 2011

The Commerce Commission’s pursuit of airlines and freight forwarders is “capricious”, and the regulator should be focusing on airports to limit over-pricing in freight services, according to Air New Zealand.

The national carrier says the regulator’s prosecution over the alleged air cargo cartel is an attempt to “impose New Zealand’s competition approach on conduct in other sovereign states” where it is complying with agreed commercial terms, leaving airlines “caught between the proverbial ‘rock and a hard’ place in trying to comply with both.”

Air NZ says airlines and freight forwarders operate in a strongly competitive environment, and that it’s monopolistic airports that are able to push prices up.

“No other country has the utterly insane legislation that allows airports to set prices as they see fit,” says Air NZ’s general counsel, John Blair, says in a written submission to the Productivity Commission’s inquiry into international freight transport services.

“The many millions of dollars being expended by the Commerce Commission in the current ‘collusive behaviour’ proceedings could have been (and still could be) better applied to addressing the monopolistic behaviour of airports,” said Blair.

The airline's submission says the competition regulator and Ministry of Transport have differing attitudes to the commercial arrangements between airlines, and that the industry’s regulation sits more easily under the ministry’s watch, because it understands air service agreements better than the Commerce Commission.

He defended the use of tariffs approved by foreign regulators, saying their filing “remains an obligation of airlines, and failure to do so leaves them vulnerable to the kind of technical, capricious proceedings by the Commerce Commission currently being defended at the cost of tens of millions of dollars to New Zealand taxpayers.”

In July, Air NZ was dropped from the U.S. Justice Department’s probe into air cargo cartels, and had already escaped censure from the European Commission and South Korean regulators, which both omitted the airline from a list of rival carriers fined for the roles in a cartel.

The airline still faces prosecution in New Zealand, and the High Court last month gave leave to the Commerce Commission to pursue its case. Air NZ has ardently denied any wrongdoing since the case came to light.

Air NZ’s submission puts high freight pricing down to the lack of competition among airports, singling out Auckland International Airport as having a substantial advantage in attracting freight forwarders, and that New Zealand’s legislation is unique in expressly allowing airports to set charges as they see fit.

“While all businesses arguably ‘market’ using revenue from existing customers, New Zealand airports do so with impunity and still manage excessive returns on their investments and/or revalued assets,” Blair said.

Until a government stares down the airports, “New Zealand consumers and our international trade and tourism will continue to suffer inflated costs,” he said.

The country’s three biggest airports are challenging the commission’s process to impose new input methodologies rules that will increase information disclosure regulation.

In another submission to the commission’s inquiry, freight forwarders say there is a “desperate” need for air freight competition in and out of New Zealand now that Singapore Airlines Cargo is the only airline offering the country freighter services.

The Customs Brokers and Freight Forwarders Federation says pricing for over dimensional cargo has become “very expensive”, with Singapore quoting up to 10 British pounds per kilogramme.

“We desperately need another airline to step into this space and look to our national carrier Air NZ to reinstate the service previously operated, albeit with a routing that is more reflective of our current trading.”

The federation also complains that waiting times for cargo release from Auckland airport, in particular, are “far too long” and inefficient.

BusinessDesk.co.nz

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