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Where's Air NZ's plan B? asks Virgin Blue

By Graeme Kennedy

Friday 27th June 2003

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Virgin Blue came out punching yesterday, accusing Air New Zealand of keeping its head in the sand over the Freedom Air issue and predicting regulators would turn down its proposed alliance with Qantas if it kept its low-cost subsidiary.

And Virgin Blue chief executive Brett Godfrey said Air New Zealand's latest submission to the Commerce Commission showed the carrier was "still on its soapbox, telling everyone that without the Qantas deal they will collapse or be taken over."

"It's incredible if they honestly believe that," Mr Godfrey said. "Where's their plan B?

Mr Godfrey said Freedom was a limited carrier, running since the Kiwi Air days, but still with only four aircraft. He said it was not in Air New Zealand's stable to make profits but to force competition away.

"We want Freedom neutralised by having it sold to someone else and we have made no secret that we would buy it and expand it overnight," he said.

"The regulators have made it clear that Virgin Blue is the most likely new entrant on the Tasman and Air New Zealand is keeping its head in the sand by insisting on keeping Freedom ­ selling it is the only way the alliance will go through.

"A lot of people do not believe it should go ahead as Air New Zealand and Qantas would turn the Tasman into a monopoly despite airlines like Emirates, which will not provide real competition as they will fly only to Auckland, not to Wellington and Christchurch."

Mr Godfrey said Virgin Blue was committed to flying to New Zealand and domestically but wanted access to airport gates.

"We're not going into a gunfight without a gun.

"There is room for a niche player in the New Zealand market and the consumer would be the winner but we want a relatively level playing field and could start with perhaps a couple of flights a day rather than the 20 or 30 we might have if Air New Zealand and Qantas monopolised the market with capacity and price collusion.

"If you listen to the regulators, the deal won't go through unless they create room and access for a new entrant and we believe that would be achieved by selling Freedom ­ standing on a soapbox and saying it's the end of the airline without the alliance won't bite with the regulators."

Air New Zealand CEO Ralph Norris said this week after the latest submission went to the Commerce Commission that the alliance was not a panacea for the future success of the company.

"That rests on the alliance in combination with Freedom Air, Express Class and further improvement of our international services," Mr Norris said. "Take one element away and damaging constraints are placed on our ability to operate successfully in the future."

The commission rejected the initial application in April and all interested parties have until July 18 to lodge cross-submissions followed by a conference in August, with a final decision due in late September.

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