Airlines heading back to court

By CHRIS DANIELS, aviation writer

Academics are handing the baton back to the lawyers in the High Court at Auckland today, as the Air NZ-Qantas alliance appeal resumes for the week.

A heavyweight line-up of mainly North American economists dominated proceedings last week, presenting thoughts on the strengths and weaknesses of various economic models. Using a technique described in legal terminology as the "hot tub" approach, each was able to make a submission, then debate their views.

The professors have now left, handing the floor back to the lawyers, who will continue making their case before Justice Rodney Hansen and Kerrin Vautier, a lay specialist in competition law, specially brought in for the case.

Qantas wants to buy up to 22.5 per cent of Air NZ for $550 million. The airlines then want to fix prices and co-ordinate services on all their flights to, from and within New Zealand.

On some routes, such as between Auckland and North America, they would have 100 per cent market share.

At the heart of the case is what kind of impact Pacific Blue, the new budget carrier based in Christchurch, would have on prices should the alliance be given approval.

Lawyers for Air NZ say it will constrain the alliance from increasing prices, while opponents of the deal argue that reducing the number of players in any market from three to two will be bad for consumers.

Jim Farmer, QC, the lawyer for Air NZ, spent two days at the start of the appeal giving a summary of the airline's case, and will now spend the next few days making his full submission. Then the Commerce Commission will do the same, followed by lawyers for airport investment company Infratil and Gullivers Pacific, a travel agency company.

All parties spent yesterday away from court, after lawyers from Air NZ last week asked for Monday to prepare their submissions.

The appeal is expected to finish by August 2, meaning just over four weeks spent in court.

Looming in the background of the appeal is the prospect of a decision coming from the Australian Competition Tribunal, the federal court where Qantas appealed against the Australian competition regulator's rejection of the scheme.

The tribunal heard the Qantas appeal in May and it is possible its decision on the case could be handed down while the airlines are running the same arguments in the High Court at Auckland.

The alliance needs approval on both sides of the Tasman. An approval from Australian competition regulators but not in New Zealand would not be enough to allow the airlines to set up the deal.