Airlines deal likely to lessen competition - ACCC

Australian Competition and Consumer Commission chairman Professor Allan Fels said he did not have much doubt that the proposal would lessen competition.

He said Air NZ and Qantas would need to convince regulators that the benefits to the public outweighed the anti-competitive effect if the alliance were to proceed.

The deal, which includes Qantas taking a 22.5 percent shareholding in Air NZ, needs the approval of both the New Zealand Commerce Commission and the ACCC.

The ACCC has previously indicated that it had concerns about proposed mergers between the two airlines, particularly on the trans-Tasman and Pacific routes.

Prof Fels said the announcement in Auckland today appeared to include "strong elements of anti-competitive arrangements, including price-fixing and route-sharing".

He said the ACCC was unlikely to reach a decision for some months.

"It will certainly need very close scrutiny," he said.

"I think it would be likely to lessen competition. I don't have a great deal of doubt about that, although we will have to talk to the parties about it."

Prof Fels said Virgin Blue -- which has complained that Air NZ and Qantas are creating a virtual monopoly across the Tasman -- would have an opportunity to present its submissions to the ACCC.

"We would be interested to see what their line of argument is," he said.

Under the timetable outlined by Air NZ chairman John Palmer, Air NZ and Qantas hope to get regulatory approval by early to mid-2003.

Virgin Blue has said it wants to enter the New Zealand market, but has been sitting on the sidelines awaiting the outcome of talks between Air NZ Qantas.

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