Secret talks on Air New Zealand and Qantas’ plans cause potential conflict of interest

Reports from New Zealand indicate that secret talks between four New Zealand Government Ministers and very senior Air New Zealand Executives have highlighted the New Zealand Government’s conflict of interest as both airline industry regulator and the key shareholder in Air New Zealand.

It is understood that the New Zealand Government may have learnt one month prior to the public announcement that Air New Zealand planned to share revenues and aircraft with Qantas on the trans-Tasman routes and it is also reported that attendees at a meeting on March 13 included from Air New Zealand Chairman John Palmer and Chief Executive Rob Fyfe and from the New Zealand Government, Finance Minister Michael Cullen, Transport Minister at the time David Parker, and Commerce Minister Lianne Dalziel.

Michael Cullen also happens to be the New Zealand Cullen Government’s shareholding minister for its 80% stake in Air New Zealand.

Media in New Zealand are reporting that despite this clear conflict of interest, no record of the discussions were kept and that Air New Zealand provided no documents for the Ministers, this being released through a letter from Minister Michael Cullen in a letter accompanying documents released through the Official Information Act.

In addition, Minister Cullen told the New Zealand’s Sunday Star-Times in New Zealand that he could not recall the code share being raised at the meeting and that the main purpose of the meeting was to discuss issues around tourism funding.

He said, “As regards the issue of code share, as shareholding minister I must absent myself from any involvement in the decision-making process on Air New Zealand’s application.”

In conflict with that comment, a Treasury note written on March 8 for Minister Michael Cullen in preparation for the meeting five days later said that an accompanying report “updates you on current issues on (Air New Zealand’s) agenda – a code share on the Tasman with Qantas”.

The subsequent stock exchange announcement on April 12 of the code share proposals led to accusations it will lessen competition on the Tasman and mean higher air fares.

There are severe concerns in New Zealand that the process and manner in which the Government is scrutinising the deal is almost as controversial as the code share deal itself, with concerns including Air New Zealand’s decision to seek approval from the Transport Ministry, rather than the Commerce Commission which has specific responsibility and expertise on anti-competitive issues.

New Zealand Stock Exchange listing rules prohibit price-sensitive information being disclosed to any one shareholder before the market is informed, though the rules provide for some exceptions and while lawyers have said that Air New Zealand could not be criticised for clearing a significant new move with its major shareholder, unlike other major shareholders in significant public companies, Air New Zealand also happens to be the industry regulator.

Wellington Airport which strongly opposes the code share deal, is not satisfied with documents released to date at its request under the Official Information Act and is asking the Ombudsman to investigate further.

Lawyers representing Wellington Airport said today that there appears to be a “cone of silence” around the meeting between Ministers and Air New Zealand which took place a month before a code-sharing application by the airline and Qantas.

Report by The Mole