Virgin baulks at buyout charade

By CHRIS DANIELS

Australian upstart airline Virgin Blue says it will not be used as a "fig leaf" to appease competition regulators should Qantas buy into Air New Zealand.

Virgin, which has taken over from the collapsed Ansett Australia as Australia's number two domestic airline, has been tipped as providing the key to convincing regulators that any buyout would not harm competition.

Under the scenario, Air New Zealand would help provide Virgin Blue with open access to the New Zealand market as a way of "greasing the skids" for a top-level equity deal with Qantas.

"Virgin Blue has no intention of being the fig leaf of competition to allow a deal to go through that is anti-competitive," said Virgin Blue commercial head David Huttner.

"Does that mean they would shut down half their operations and hand them over to us? I don't think so."

Virgin Blue said its previously announced plans to one day fly across the Tasman remained, but it would make no commitments until the details of any Qantas-Air New Zealand tie-up were known.

"Our interests and timing in New Zealand, how much resource we put into New Zealand, really depends on whether we think that competition issues will be protected," said Huttner.

"If the Air New Zealand-Qantas merger goes ahead with no demonstrated consumer benefit, we certainly would have some concerns."

These two airlines have been in discussions for the past few months. Clearance from New Zealand's Commerce Commission and Australian competition regulators is the main hurdle to Qantas buying up to 25 per cent of Air New Zealand.

Huttner said regulators on both sides of the Tasman needed to "define what the rule book is" before a commitment to flying to New Zealand could be made.

Air New Zealand chief executive Ralph Norris told the Australian Financial Review that the issue of Qantas belonging to a rival alliance - oneworld - had not yet been resolved. Air New Zealand belongs to the Star Alliance, which imposes hefty penalty payments on any member wishing to leave the grouping.

Norris told the newspaper that he expected Star would be "disappointed" to lose Air New Zealand, but then again, Qantas could join Star.

* Virgin Blue yesterday announced it had sealed a code share agreement with major international carrier United Airlines.