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Air NZ puts pressure on regulator to drop 'untenable' cartel case ahead of court hearing

Friday 10th May 2013

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Air New Zealand, the national carrier slated for a partial sell-down by the government, has ramped up pressure on the Commerce Commission to drop its long-running pursuit of the airline's alleged involvement in a global cartel on air cargo surcharges.

The Auckland-based airline is the only carrier out of 11 not have settled with the antitrust regulator, and is urging the commission to either settle the dispute through more talks, or go to the Court of Appeal to determine the definition of 'market', it said in a statement. Air NZ is scheduled to appear in the High Court in Auckland for a penalty hearing relating to the cargo case after it was put off on Monday.

"As a state regulator with strict responsibilities to ensure fairness and objectivity it is untenable for the commission to try to enforce a settlement with Air New Zealand when a key piece of evidence has been retracted under oath," general counsel John Blair said.

The airline said it couldn't disclose the nature of the retracted evidence, as US courts ordered it remain confidential.

"We have satisfied regulators in Europe and the USA concerning our conduct and are close to the end of our defence of allegations in Australia. In the New Zealand market, it is time for common sense to prevail," Blair said.

Last month the commission settled with three airlines, taking total penalties to more than $35 million, and leaving Air NZ as the last carrier defending the case.

The national carrier had previously agreed to put off appealing a 2011 High Court ruling on the definition, which let the regulator proceed with its case, but now says waiting for the result of a second trial will be a "complete waste of time and taxpayer money."

Blair said the airline has spent more than $10 million defending itself, and the regulator's costs are also likely to run into the millions of dollars.

"There seems little point in either party spending a single cent more when the commission knows that a key piece of its original evidence has been retracted under oath," he said.

The alleged price-fixing has been the subject of antitrust process worldwide, with big settlements from multi-national airlines in Europe and the US. Some of the alleged agreements appear to have been in place since 2001.

In 2006, air freight forwarding services in and out of New Zealand generated $450 million in revenue.

Air New Zealand stopped charging a separate fuel surcharge on outbound cargo from New Zealand in January 2002, according to a May 2011 High Court judgment setting a penalty for Qantas' involvement in the cartel.

Qantas routinely exchanged information and assurances with other carriers relating to fuel surcharges, the judgment said, without naming Air NZ as one of those carriers involved.

"In January 2002, the impugned conduct ceased in relation to fuel surcharges on outbound cargo from New Zealand, because the home carrier, Air New Zealand ceased to impose a separate fuel surcharge and the understanding became unworkable," the May 2011 judgment said. "For in-bound cargo, the conduct ceased world-wide in February 2006, when the details of the FSU (fuel surcharge understanding) became widely known internationally."

Shares in Air NZ rose 0.3 percent to $1.50 yesterday, and have gained 16 percent this year.

The commission has received penalties from British Airways, Cargolux Airlines, Emirates, Japan Airlines, Korean Air Lines, Qantas Airways, Singapore Airlines Cargo, Cathay Pacific, Thai Airways International and MASkargo System Berhad, which replaced Malaysian Airlines.

The regulator dropped proceedings against Garuda Indonesia, United Airlines and six Air New Zealand executives in 2011, and discontinued against two Qantas executives in February last year.

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