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Air New Zealand warns axed code sharing deal with Qantas means cutbacks likely

6-Nov-2006

Wellington (XFNews-ASIA) - The decision by Australia's competition watchdog to reject a code sharing deal between Qantas Airways Ltd and Air New Zealand Ltd could mean cutbacks on trans-Tasman services, Air New Zealand said.

"We cannot continue to fly the equivalent of 43 empty A320 aircraft across the Tasman daily," Air chief financial officer Rob McDonald said in a statement.

"That's 6,300 empty seats every day."

The Australian Competition and Consumer Commission (ACCC) said in a preliminary decision that a code-share agreement would "fundamentally change the competitive process" since the two airlines already dominate these routes.

It said the benefits did not outweigh the likely "significant" costs to the consumer in terms of higher prices and reduced travel options.

"Authorisation of the agreement would fundamentally change the competitive process on the trans-Tasman," ACCC chairman Graeme Samuel said.

McDonald said Air New Zealand would fight the draft decision.

"Although we have only had a short amount of time to review the determination's contents, we have already spotted flaws and we will be raising these with the ACCC before a final determination is made," he said.

"The poor performance of both Air NZ and Qantas on the Tasman has been well documented. The ACCC is misguided if it thinks airlines will keep pouring tens of millions of dollars into underperforming routes.

"Airlines are not a charity."

Between them, the two airlines handle about 80 pct of the trans-Tasman passenger market.

They also own budget offshoots JetStar and Freedom Air.

Infratil, a 66 pct shareholder in Wellington Airport and vocal opponent of the scheme, said it was "absolutely" the right decision for trans-Tasman competition.

If Air NZ cut services, Qantas or Virgin Blue would no doubt fill the gap, Infratil's manager Lloyd Morrison said.

He added the decision would "hopefully, ultimately ... be good for the regional and domestic markets in New Zealand and I think it will be good for both carriers, keep them both focused."


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