By CATHY ARONSON transport reporter
Qantas and Air New Zealand's refusal to guarantee that cheap domestic airfares will stay if the airlines join forces has brought calls for greater protection to keep fares down.
The deal to run domestic and transtasman prices and schedules together while advertising as two separate airlines was criticised immediately by competition watchdogs and consumer advocates when it was announced on Monday.
The Consumers' Institute and United Future's Peter Dunne have asked that the airlines sign agreements to keep fares down before their deal is approved.
Air New Zealand chief executive Ralph Norris said the airline could not guarantee its fares because of airline industry uncertainty, exchange rates and fuel prices.
The Government, as 82 per cent owner of Air NZ, has yet to agree to let Qantas buy a 22.5 per cent shareholding, giving it two seats on the Air NZ board.
Air NZ will get one seat on the Qantas board.
The airline may have to change details of its proposal when it faces scrutiny from competition watchdogs on both sides of the Tasman.
The deal is not expected to gather all the necessary approvals for at least six months.
Mr Norris denied Air New Zealand had a back-up plan, and said its proposal was "the best option".
Domestic and transtasman flights will be run by both airlines, with day-to-day commercial control in the hands of Air New Zealand.
The airlines could not guarantee prices would remain at their present levels, but said they would still be competitive and would fight off other airlines.
The obvious competition, budget carrier Virgin Blue, has said it will not enter the market if the airlines become a monopoly.
Air NZ and Qantas are expected to tell the Commerce Commission that two airlines cannot survive in New Zealand.
Mr Norris said Air NZ planned to show that national interests outweighed competition issues.
"There's no point denying it. The brutal facts are, who is going to continue to underwrite, with blank cheques, second airlines in New Zealand that don't make money? It's totally unrealistic."
Qantas chief executive Geoff Dixon admitted his airline was losing money and could not continue to match Air New Zealand's new budget fares, which have cut the price of air travel within New Zealand by up to 60 per cent.
"Pricing will be competitive, but it still has to be sustainable," he said.
Mr Norris said the airline was committed to affordable fares, but could not guarantee they would stay at their present low.
"Pricing will be somewhat similar," he said.
"There are obvious detriments in regards to this arrangement. There are also sizeable benefits that accrue to the benefit of national interest."
Air NZ estimates the deal will be worth $1 billion to the New Zealand economy over five years.
Consumers' Institute chief executive David Russell said that if the airlines proved the deal was in the national interest, the Commerce Commission still had to protect competition.
If the airlines would not sign a written guarantee the Government should widen the powers of its Kiwi Share to include commitments to pricing and schedules.
Government and airline officials met yesterday to sort out the Government's Kiwi Share national-interest considerations.
These include control by New Zealanders, air rights, identity, national and international tourism and travel and employment.
* Thousands of Air New Zealand passengers face cancelled or delayed flights today when flight attendants go on strike.
The 1000 flight attendants are striking for 14 hours today and on Friday as part of their campaign to win longer breaks between long-haul trips.
Today, the airline has cancelled two flights between Auckland and Sydney and has delayed nine others to Australia, the Pacific islands and Asia.
Most flights are delayed by two hours but one flight to Brisbane, Flight NZ131, will leave 14 hours late.
The Flight Attendants and Related Services Association gave the airline two weeks' notice of the two 14-hour strikes.
The attendants want a day's break after the 13-hour flight to Los Angeles instead of 16 hours.
Air New Zealand had doubled its daily flights to Los Angeles, putting more pressure on flight attendants.
The airline is yet to announce any cancelled or rescheduled flights if the second strike action goes ahead on Friday.
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