Ministers quiet on airline deal but Opposition promises flak

By VERNON SMALL and FRANCESCA MOLD

The Government is refusing to comment on the merits of Qantas' plans to take a 22.5 per cent stake in Air New Zealand, saying that as a shareholder and regulator it must stay silent.

But the Opposition is warning it will not stay quiet, because the deal is bad for competition and for the travelling public.

As an 82 per cent shareholder in the national carrier, the Government has promised to make an in-principle decision on the deal by December 18.

At the same time, in its role as Kiwi Share holder, it will make a conditional decision on whether the deal is in the national interest.

If the deal crosses those hurdles, the Commerce Commission will rule on whether it meets competition requirements and its national-interest test.

But the Government will not make any submissions to influence the commission.

The Finance Minister, Michael Cullen, Associate Finance Minister Trevor Mallard and Transport Minister Paul Swain told a press conference yesterday that they would not comment on any aspects of the deal.

They were told of the detailed proposal at separate briefings yesterday morning, although they had been aware of talks between Qantas and Air NZ since early in the year.

About three weeks ago they were told Air NZ wanted to talk to the Government about a possible deal.

Papers released yesterday show that last Monday's Cabinet meeting agreed to make the interim decisions by mid-December "should a proposal be received".

They would be subject to no material changes being made to the deal.

Cabinet's Kiwi Share national-interest ruling will hinge on six issues:

* The maintenance of effective control of Air NZ by New Zealand nationals.

* Continuation of the airline's ability to exercise air rights.

* Preservation of Air NZ's unique identity.

* Provision of effective channels for international tourism and travel.

* Provision of a durable domestic air services network.

* Preservation of New Zealand-based employment.

Meanwhile, it would ask the airlines to provide information on planned changes to Air NZ's constitution, governance, branding and marketing plans, schedules and routes, expected capacity, alliance-and code-sharing arrangements, and the frequent flyer programme.

Treasury advice also released yesterday told ministers that they should continue to separate the ownership role (Dr Cullen), the regulatory role (Mr Mallard) and the Kiwi Share holder (Transport Minister Paul Swain).

That would keep commercial information handed to the Government confidential and separate from its role as a regulator.

The Treasury warned that the Crown risked losing its right to vote on the proposal if it was drawn into shaping the proposal and became "a related party".

The separation of roles should continue until the Cabinet decision in mid-December.

Officials also advised ministers to stay silent on what they thought of the deal.

But if the Government is staying quiet, Opposition MPs were strong in their condemnation.

National leader Bill English vowed to try to stop the partnership by harnessing public and industry opposition.

"This deal can be stopped if we can show the Government the strength of public feeling that exists about it," he said. "This is a Government that buckles to public opinion quite readily."

He would meet tourism, business and industry groups over the next few weeks to discuss their concerns. National has also set up a website (www.noqantas.co.nz) and has sought a snap debate on the issue when Parliament resumes next week.

Mr English said that although the Government denied having made up its mind if the deal met national-interest criteria, it had clearly indicated to Air NZ when it entered into talks that it did not oppose a potential alliance with Qantas.

"This deal would not have got this far without, at the very least, a nod and a wink from the Government."

National was not opposed to Air NZ being sold but believed Qantas was the wrong buyer because it would damage competition.

Mr English also raised concerns about alleged inconsistencies in the description of the deal presented by Qantas to the Australian Stock Exchange, and by Air NZ.

Qantas would pay for 22.5 per cent of Air NZ but through the proposed advisory group would get 50 per cent control of its day-to-day activities.

United Future, which supports the Government on confidence and supply votes, yesterday described the proposal as a "black day" for aviation and the travelling public. Leader Peter Dunne said Labour was alone in supporting the plan, which would result in the return of a monopoly to New Zealand skies.

The Greens also called on the Government to reject the deal, which it believed was not in the country's national interest.

"The kangaroo has pocketed another kiwi," said co-leader Rod Donald.

He said the Government had rescued Air NZ last year because it was a crucial strategic asset and a part of our national identity. He questioned why it would now want to hand over a controlling interest, with seats on the board, to Air NZ's most bitter rival.

Act leader Richard Prebble condemned the deal as anti-competitive, saying shareholders would benefit directly at the expense of customers.

He said the Government had a conflict of interest in its desire to reduce its risk as shareholder and its duty to promote competition.

New Zealand First leader Winston Peters said it was too early for his party to decide where it stood on the proposal. NZ First's concern was that the travelling public should have access to internationally competitive prices and services.

Progressive Coalition leader Jim Anderton said ministers' legal advice was to not comment publicly on the details. He would carefully consider the deal and how it met the national-interest criteria.

The Service and Food Workers Union said its members who worked at Air NZ were relieved at the announcement of a new partnership. But national secretary Darien Fenton said it was less clear what the impact would be on Qantas workers in New Zealand.