Sceptical Virgin gives warning

By CHRIS DANIELS aviation writer

Promises of good behaviour from merger hopefuls Air New Zealand and Qantas cut little ice with potential rival Virgin Blue.

Senior managers from the budget carrier arrived in Wellington yesterday to brief politicians and the Commerce Commission on what they see as vital conditions needed to keep the two airlines honest.

Air New Zealand chief executive Ralph Norris said this week that terminal access and ground services would be readily given to new rivals under enforceable agreements, which would include promises not to use predatory pricing to shut out competition.

The concessions accompanied an economic analysis by Air New Zealand and Qantas of their merger proposal, in which Qantas will buy 22.5 per cent of Air New Zealand's shares.

But such promises mean little to Virgin Blue. Its commercial head, David Huttner, said structural changes to the market were needed before any Qantas-Air New Zealand deal went ahead.

This meant the two airlines would have to give up facilities, not just agree to let others use them.

Disposal of Freedom Air should be another condition.

Assurances on terminal access, engineering services and a commitment not to use predatory pricing were unenforceable, said Huttner.

Leopards did not change their spots, he said, and Virgin Blue was well versed in the obstructive tactics used by big airlines to make life difficult for competitors.



Huttner asked whether Air New Zealand and Qantas would willingly let a rival use their terminal facilities during busy times, or would it be permitted only when it suited them?

Virgin Blue spent the day talking to politicians from across the spectrum - Green, United Future and National.

Huttner said the airline was not saying the Qantas-Air New Zealand deal should be blocked.

But structural change was needed before it went ahead.



And he hoped the Government would try to become more of an active participant in the issue, or it would find New Zealand aviation policy being dictated by Mr Norris and Qantas chief executive Geoff Dixon.

In further reaction to the airlines' economic analysis, Tourism Industry Association chief executive John Moriarty said he did not know if predictions of 53,000 extra tourists stemming from the deal would happen.

But if Air New Zealand was not around to promote this country as a tourist destination, no one else would.

The airline was by far the biggest spender in promoting New Zealand as a destination.

Joint promotions overseas had worked, in the past and Qantas would just have to learn how to promote New Zealand as well as Australia.



Joint marketing initiatives might not be as successful as some expected, but the down side - Air New Zealand becoming only a domestic or transtasman operator - would be disastrous.



Moriarty said the tourism industry was optimistic about the merger.

Predictions in the report of an increase in air freight capacity were scorned by Daniel Silva, secretary of the Importers Institute.

He said it could not increase when the whole point of the deal was for Qantas and Air New Zealand to cut costs by reducing capacity.

Transport Minister Paul Swain and Finance Minister Michael Cullen are expected to announce next week their decision on whether the deal appears to be in the national interest.