Virgin queries merger figures

By CHRIS DANIELS aviation writer

Australian budget airline Virgin Blue yesterday unveiled its submission on Air New Zealand's alliance plans to competition regulators on both sides of the Tasman.

It also produced economic analysis challenging research commissioned by Air New Zealand and Qantas.

This research has been used to help sell the plan for Qantas to buy 22.5 per cent of Air New Zealand and for the two airlines to co-operate rather than compete.

Virgin Blue says Air New Zealand should be forced to sell its low-cost subsidiary, Freedom Air, before competition regulators allow it to join forces with Qantas.

Virgin's commercial head, David Huttner, said that if Air New Zealand believed its future was in jeopardy without the alliance, it should have no problem agreeing to its requests.

If it would not accept a request to sell Freedom and ensure terminal space and ground handling facilities, then its claims of impending doom were obviously baseless.

"The emperor has no clothes," Huttner said. "We are calling their bluff."

Virgin says the alliance raised the substantial risk that its own entry into New Zealand "may not be as substantial as it otherwise would be".

Regardless of this, it would probably not be able to provide the scale of operations and in the timeframe on which Air New Zealand and Qantas based their application.

Air New Zealand uses the impending arrival of a "value-based airline" such as Virgin Blue as giving customer choice for passengers not wanting to fly with it and Qantas.

Huttner said Virgin Blue could not provide any realistic level of competition without structural change in the industry - namely Air New Zealand selling Freedom Air and handing over terminal facilities.



Concern about the alliance has also been raised by the Australasian Business Travel Association, which says it represents 400 buyers and suppliers of business travel on both sides of the Tasman.

There is a potential to "tightly control" the transtasman and other competitive routes such as those to the United States through code sharing and other methods, meaning reduced choice and higher prices, the association says in its submission to the Commerce Commission.

The move towards flying narrower planes across the Tasman is the prime concern of the Air Freight Council of Queensland in its submission.

The council says New Zealand is the largest airfreight export destination for Australians.

Qantas and Air NZ carry 85,700 tonnes a year, or 70 per cent of the total cargo, 92 per cent of it in containers below the decks of wide-bodied Boeing 767s and 747s, it says.

Council executive officer Peter Langdon told the commission that if it approved the alliance, it should make sure overseas rivals were given full rights to run passenger and cargo services across the Tasman.