Editorial: Air NZ monopoly unthinkable now

It is a sign of how much has changed that one of the loudest voices lamenting the collapse of Qantas New Zealand at the weekend was the Acting Prime Minister, Jim Anderton. When competition came to main trunk air services 13 years ago, he represented a widespread tendency to see any duplication of assets and services as wasteful, inefficient and, in the phrase of the day, "cut-throat."

Competition between domestic airlines did more than any other deregulated service to dispel that attitude. The improvements were immediately obvious in the quality and convenience of the service - air bridges from terminal to cabin, better food, the disappearance of plastic cups and cutlery. Ansett New Zealand, latterly a Qantas franchise, gave this country a good deal.

It was never a cut-price competitor. It matched, rather than undercut, Air New Zealand's fares and sought to gain a market share on quality. To those outside the airline business, that might have seemed a tactical error. Air NZ, for all the sins of its internal monopoly, had a reputation for high quality on international routes. But established airlines such as Ansett are reluctant to devalue the product.

For much the same reason - the industry's interest - Air NZ readily came to the rescue of passengers stranded by the sudden demise of its rival at the weekend. Despite having just come to the assistance of its troubled subsidiary on Australian routes, Air NZ managed to put on extra flights for Qantas NZ ticket-holders and scheduled 50 additional services yesterday. It did so without self-congratulation, in public anyway, at the fact that it has faced competition and won.

Air NZ's achievement should be acknowledged. It is no negligible feat, even for a long-established company, to see off a competitor. If there was not room for two airlines in this market, there is not much doubt which one New Zealanders would have preferred to see survive. All things being equal (as they quickly turned out to be), a newcomer in the domestic market was bound to struggle against the national carrier.

It was a tragedy that after a long haul built on staff loyalty, Ansett sought to cut its costs in preparation for sale and impaled itself on a dispute with its pilots. The market share it lost at that time could not be recovered. If those losing the money ever considered turning their airline into a no-frills operation, they kept the thought to themselves. Perhaps they were deterred by the fate of budget carriers who have challenged Air NZ on transtasman services.

But low-cost carriers are now competing on Australian internal services and the New Zealand Government ought to ensure that nothing bars their way into this country. As Mr Anderton says, a second domestic airline is vital.

Qantas may feel the need to step in for the sake of its brand, although it has no financial stake in the New Zealand franchise that bears its name. It is doubtful, however, that Qantas would set up more than an internal feeder for its international services. The lesson of the past 13 years may be that a duo of full-service operators might not be viable on New Zealand's main trunk routes. Competitors may have to offer a different sort of service, smaller and more specialised or simply cheaper.

It may take a while for the shape to emerge. In the meantime, Air NZ will know the domestic market remains open. If it does not watch its costs and service, it could find itself challenged again.