The end is in sight for the long and sometimes acrimonious legal battle between the Commerce Commission and Air New Zealand after they agreed on a $7.5 million penalty for breaches of the Commerce Act by the national flag carrier from 2001 to 2006.

At the High Court in Auckland, Justice Geoff Venning reserved his decision on the size of the penalty. A decision is expected in 10 days.

The airline this week agreed to settle its long-running air-cargo case with the commission, despite an earlier 11th hour bid to cancel the deal.

Air New Zealand has long fought the charges while 10 other airlines charged with similar offences have quietly settled, paying a total of $35 million in penalties.


The commission alleged that the airlines colluded to impose fuel and security surcharges for air cargo shipments to and from New Zealand.

In today's court proceedings, the Queen's Counsel for the commission, Brendan Brown, said the consumer watchdog's "start point" was for a $9.0 million to $9.75m penalty.

But he said mitigating factors, such as the fact that there had been no previous contraventions by the airline, meant a 20 per cent discount should apply.

The charges related to air cargo services on three routes - Japan, Malaysia and Australia.

Air NZ admitted liability to charges relating to the Japan and Malaysia routes. On the Australian charges, the airline did not contest them but did not admit them either.

The airline's Queen's Counsel, Alan Galbraith, said the fuel and security surcharges were imposed during "extenuating circumstances" of very high fuel costs, which were made worse by the impact on the aviation industry of the September 11, 2001, attacks on the United States.

Galbraith said Air New Zealand's insurance costs went from US$3 million just before the attacks to US$28.3m immediately afterwards. Four years later, they were still high at US$13.83m.

He said no commercial gain was involved and that the level of surcharge was small.