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ACCC rejects Qantas Air New Zealand deal
Air New Zealand has warned that it will be forced to slash trans Tasman flights as a result of the ACCC in Australia rejecting the proposed arrangement with Qantas.
The airlines wanted a deal that would give them 80% of the trans-Tasman market, Australia’s busiest overseas route, and allow them to co-ordinate routes, aircraft, schedules and fares, arguing that there was too much capacity on the route mainly from Emirates and Pacific/Virgin Blue which had significantly hampered Air New Zealand and Qantas’ ability to operate the route profitably.
The long-awaited Australian Competition and Consumer Commission draft decision said the deal would give the airlines too much market power for too few benefits and would “fundamentally change the competitive process on the trans-Tasman”.
ACCC chairman Graeme Samuel said the deal would produce only limited public benefits in the form of cost savings to the airlines as well as marginal improvements to schedules, connectivity and frequent flyer options.
He added that the Commission saw the anti-competitive detriments as being significant but the public benefits as only small, with the Commission’s analysis showing that Virgin Blue and Emirates had only a limited capacity to grow their services beyond current levels, particularly in the business market, adding “Business people tend to focus much less on price and much more on flexibility and, of course, there are high barriers to entry for Virgin, Emirates and the others to meet that flexibility in terms of scheduling”.
Qantas CEO Geoff Dixon not surprisingly issued a brief and terse statement, saying he was not surprised at the decision “given the ACCC’s track record on this issue”, with Air New Zealand though saying that it was “flabbergasted and astounded” and claimed it had already spotted flaws in the draft document, with CFO Rob McDonald adding “If the ACCC sticks with this determination it is potentially forcing Air New Zealand to make capacity and route decisions that will come at a significant cost to consumers.”
The ACCC is seeking further comments on the proposal before delivering a final decision early in the 2007.
Report by The Mole
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