Out to win over the watchdogs

By GREG ANSLEY Australia correspondent

CANBERRA - Australian aviation analysts believe Qantas' bid for a 25 per cent stake in Air NZ has been designed to appeal politically to Wellington and framed to satisfy competition watchdogs on both sides of the Tasman.

With speculation growing that a re-elected Labour government would approve the deal, the Australian flag carrier's move is regarded more as a defensive strategy than an attempt to neutralise Air NZ.

Centre for Asia Pacific Aviation director Peter Harbison said if Qantas did own 25 per cent and got a couple of directors, Air NZ would still relentlessly pursue its own interests and remain competitive.

But the Qantas bid is riding turbulence in transtasman aviation, with aggressive moves by both airlines in each other's markets, increasing competition from Virgin Blue, and speculation of both a Qantas-Singapore Airlines link and a new Singapore-backed domestic airline in Australia.

Qantas is also lobbying the Australian Government to lift the 49 per cent cap on foreign investment in the airline.

But while that proposal has strong backing within the Government and from the Labor Opposition, the acquisition of a 25 per cent holding in Air NZ could run foul of competition regulators on both sides of the Tasman.

In New Zealand there would be difficulties with takeover laws and, given the domination of both domestic and transtasman traffic by the two airlines, with the Commerce Commission.

Similar concerns exist in Australia, where, since the collapse of Ansett, Qantas has gained 80 per cent of the market.

The Australian Competition and Consumer Commission said yesterday that it would examine the implications of a 25 per cent Qantas stake in Air NZ for both Pacific and transtasman routes, and any further effects on the international alliances each belongs to.

Analysts believe Qantas and Air NZ will try to sell any deal with the argument that the public would benefit by helping the troubled Kiwi carrier to a more secure future, with no impact on competition.

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