Air NZ agreement attacked

By PETER GRIFFIN

The Importers Institute has launched a point by point attack on the proposal for Qantas to buy a 22.5 per cent stake in Air New Zealand - instead favouring a sale of the national carrier to buyers who can run it more efficiently.

Lodging a submission with Australian and New Zealand competition regulators on the eve of Christmas, the institute said the deal would act to decrease carrying capacity, pushing up air-freight prices as a result.

But the institute did not stop with its self-interested goal of keeping freight prices down, claiming political rather than commercial factors would likely halt a sale if a potential buyer were to emerge.

Alternatively, the institute said, the Government had the option of "continuing to sink large amounts of taxpayers' dollars into a failed business should it decide that it is too politically unpalatable to sell it".

The institute said the airlines had claimed in their proposal that no other operators had expressed interest in forming a strategic alliance with Air New Zealand that would resolve its "strategic imperatives".

But the institute pointed out that Singapore Airlines was ready to fund Air New Zealand last June.

"That must have met the 'strategic imperatives' of Air New Zealand, since its board approved a proposal from Singapore Airlines for a 25 per cent holding, through a stock placement of $1.37 a share," it said.

A reduction in carrying capacity, said the institute, was the main rationale behind the proposal, however the airlines were claiming that capacity would increase.

"These two irreconcilable positions are reconciled by using the device of comparing current capacity against a worst-case scenario based on confidential data," it said.

"The airlines have, in fact, put up a straw man, against which their preferred scenario looks that much better."

The institute also compared the airlines' claims that "a strong home base" was needed to place Qantas on an even footing with its international competitors, to the protectionist demands of local manufacturers looking for shelter from low-priced imports in the form of tariffs.

"The argument made no sense in that context; it is equally patent self-serving nonsense, when applied to airlines."

Competition regulators are at present analysing proposals from Qantas and Air New Zealand.

"If they are successful in clearing the proposed deal with regulators as it currently stands, Qantas will pay $550 million for a 22.5 per cent stake in Air New Zealand, diluting the Government's holding to 64 per cent from 82 per cent."