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Opinion: NZ High Court ties flying Kangaroo down

By Kate Perry of NZPA

Friday 24th September 2004

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Australians might own our banks and beat us in the odd ball game, but the ockerisation of our national airline is now no longer on the cards.

This week, the High Court in Auckland put the kibosh on the $550 million proposed tie-up of Air New Zealand and Qantas.

Both Air NZ and Qantas have said the decision spells the end of any comprehensive alliance, though they haven't entirely conceded defeat.

The airlines still have 15 working days from today to appeal the High Court decision but have indicated they will instead look at ways to co-operate that skirt around trans-Tasman competition regulation.

Air NZ's chief executive Ralph Norris is today holed up in Sydney with Qantas CEO Geoff Dixon to discuss their options.

After the High Court ruling was handed down on Monday Norris said the airlines needed to look at ways they could work together that didn't conflict with the regulators.

"We've been talking about the possibilities of co-operating in a number of areas, and we really haven't got that hammered down at this point."

A spokeswoman at the Commerce Commission couldn't comment on what options existed for the airlines to work together in a way that wouldn't breach anti-competition regulations, saying it was up to the airlines and their legal teams to consider their choices.

But possibilities already bandied about in the media include a common pool of parts for the new Airbus A320, and sharing maintenance staff and equipment. Other commentators have raised the possibility of Qantas leaving the oneworld alliance and joining Air NZ in the Star Alliance.

There is still a slight possibility the Australian Competition Tribunal (ACT) will not reject the appeal - although that seems unlikely. But Mr Norris seemed to be holding on to a vestige of hope when he spoke to Australian Associated Press on Monday.

He said that while comprehensive co-operation on the trans-Tasman route would no longer be possible, approval from the ACT would enable a modified alliance in other markets.

"What we would have to do is to look at what are the carve outs that we could do which would allow us to take advantage of a positive ruling from the ACT," Norris told AAP.

The airlines had proposed a $550 million trans-Tasman tie-up, which would give Qantas a 22.5% stake in Air New Zealand, and let Air NZ gain control of both airlines' flights to, from and within New Zealand.

After watchdogs on both sides of the Tasman rejected the proposal last year, appeals were launched in each country.

For Air New Zealand, which took on the mantle of "Airline to Middle Earth" following the success of the Lord of the Rings movies, the High Court proved to be Mount Doom without the happy ending.

Speaking with Gollum-like gloom after the ruling, Air New Zealand warned that the price of its cheap $99 fares to Australia could double.

Interestingly, the price-hike argument echoed concerns raised by the watchdogs when they rejected the alliance.

Both the New Zealand Commerce Commission and the Australian Competition and Consumer Commission ruled the alliance would be anti-competitive and would lead to higher airfares for some passengers.

If Air New Zealand and Qantas did feel the need to raise airfares, they would do so in a vastly more competitive world than the one they faced a couple of years ago when they first mooted the proposal.

Pacific Blue and Emirates Airline are just some of the new names traversing the Tasman and offering customers fares which are cheap as "chups/cheeps".

In October 2003, Air NZ launched Tasman Express, reducing fares between New Zealand and Australia by 25% on average and up to 45%.

Trans-Tasman travellers have rarely had it so good and the numbers of people crossing the ditch are on the rise.

Data out from Statistics New Zealand this week showed the number of Australian visitors to New Zealand in August was up 10,500 or 19%, while New Zealanders on short-term jaunts to Australia shot up 32% or 20,100.

But it's not just the competition which has changed since the alliance was first dreamed up.

A couple of years ago Air New Zealand was teetering on the edge of financial disaster, needing an $885 million handout from the Government to keep going. This made the decision to try and play nicely with its trans-Tasman neighbour a no-brainer.

Since then, even in this tough new era of terrorism and rocketing oil prices, Air New Zealand has managed to engineer a remarkable turnaround. It posted a net profit of $165.7 million for the year ended June and recently embarked on a overhaul of its longhaul fleet.

The national carrier also seems to have prepared itself for losing the appeal, launching its first major rebranding exercise in Australia since the collapse of its former subsidiary Ansett Australia in 2001.

The demise of Ansett cost about 15,000 jobs and severely tarnished Air NZ's image in Australia. Since then the airline has kept a fairly low profile across the Tasman, but earlier this month it launched a multi-million dollar advertising campaign - headed up by former Wallaby Peter FitzSimons.

Alliance or no alliance, having a former Australian rugby player extolling the virtues of our national carrier proves we still have good neighbours. And everybody needs those.

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