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Origin Pacific believes Air NZ-Qantas deal should be modified

Wednesday 2nd April 2003

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A draft decision by the Commerce Commission is due on April 7, after 77 submissions from groups and individuals have been made on the proposed alliance.

Air New Zealand chief executive Ralph Norris endorsed last month Finance Minister Michael Cullen's view that the alliance plan is unlikely to get initial regulatory approval, but said the deal could be salvaged once the airlines made concessions.

Nelson airline Origin Pacific was singled out as being most affected by an Air New Zealand and Qantas partnership, which would give the two allied airlines more than 90 percent of the total domestic traffic and an estimated 75 percent of all international traffic.

A report by an Australian economics consulting group said Origin could lose more than a quarter of its market share if the partnership was approved.

Origin has said it would be "highly unlikely" that it could resist a two-brand alliance .

"Predatory behaviour can cripple a smaller airline or put it out of business by denying it break-even load factors and revenue," Origin has argued in its submission.

Origin has a close relationship with Qantas through its codeshare arrangement. Qantas buys seats on Origin, which provides a feeder service on to the Australian carrier's wider network.

The consultants' report infers the agreement may continue, but Origin says it could not rely on this.

Mr Marks said an alliance between Qantas and Air New Zealand had the potential to hit Origin twice, firstly through the loss of the relationship and then the need to replace the business.

He said Origin Pacific has "made its position quite clear" in its 18-page submission to the Commerce Commission, particularly its "important and growing alliance relationship with Qantas".

Qantas has just bought more seats on Origin Pacific, which has invested in a mix of dedicated aircraft for Qantas. The recently introduced 66-seat ATR aircraft will be used mainly for Qantas seats, Mr Marks said.

He said Air New Zealand's whole submission placed a lot of emphasis on British-backed Virgin Blue airline moving into the New Zealand market.

"Air NZ has suggested Origin Pacific can replace lost traffic by dealing with Virgin. Their whole submission places a lot of emphasis on the fact Virgin will be here but we're of the position you need to develop a series of plans.

"At the moment we feel there's a lot of water to go under the bridge yet, but the application may be turned down.'

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