Editorial: Qantas can help Air NZ fly higher

The chief executive of Qantas, Geoff Dixon, denies telling an internal management forum last month that the company aims to run Air New Zealand out of business. "At no stage have I ever mentioned that ... ," he said. "That would be stupid."

Impolitic, he means, not stupid. It would make perfect business sense of Qantas to aim to be the sole full-service airline in this part of the world, but it would not be politic to say so.

For one thing, the public interest lies in competition and governments are conscious of that these days. For another thing, the New Zealand Government has just contributed $885 million of taxpayers' money to Air NZ to keep it in business.

When the chips were down last year there was no question of New Zealand's commitment to the survival of a national flag-carrier. No matter what it cost to rescue the airline from its disastrous Ansett purchase, and no matter how culpable the board of Air NZ had been, the company could not be allowed to collapse. That realisation rather denied the purpose of privatisation, which is to expose commercial activities to the disciplines of the market where companies stand or fall on their own decisions.

The difficulty now is to see that the disciplines of the market are not entirely forgotten. Air NZ is now carrying a great deal of Government equity. The Government's temptation to protect that interest will be immense. And the airline's temptation will be to suppose that it is now ultimately protected from competition.

Already there are signs of that in the company's refusal to remove a "temporary" freight surcharge introduced to meet higher fuel costs two years ago. It appears unconcerned that its main competitors, Qantas, British Airways and United Airlines, dropped their temporary surcharges last month after fuel prices relented.

But if the company is not acting competitively in that instance, it is quick to invoke "commercial sensitivity" when explanations are sought. The Government says it is not about to make the company answerable under the Official Information Act, as state-owned enterprise normally is, and as Air NZ was before its privatisation. Now it survives as neither fish nor fowl, vulnerable neither to competition nor public scrutiny, for as long as the Government holds its 82 per cent stake.

Mr Dixon evidently told his managers that the New Zealand Government wanted Qantas to buy in to Air NZ eventually. Finance Minister Michael Cullen denies that, although he does not rule it out.

He reaffirmed that the Government is looking for a cornerstone shareholder, though not this year. If Qantas' intentions were to run Air NZ out of business, he said, it would be well down the list of preferred partners.

Quite, but let us hope Qantas' intentions are to run its competitor as hard as it can, and that it remains well down the list of preferred partners. New Zealanders need domestic competition, especially now that the national airline has received the comfort of a public rescue.

Last week, Qantas announced plans to add two or three more 737-300 aircraft to its routes in New Zealand. It is also looking at running more international services from here.

It is a big step to invest in competition against a Government-backed company. Qantas' ambitions can be welcomed by airline customers in this country. Air New Zealand can rise to the challenge.

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