Air New Zealand says rejection of Virgin Blue alliance threatens survival

Air New Zealand CEO Rob Fyfe stated a final rejection of its proposed Virgin Blue trans-Tasman alliance threatens the carrier's future survival and would leave "the dominating power of the Qantas-Jetstar bloc completely unchecked" (AAP/The Australian, 23-Sep-2010). He commented that the rejection will prevent the carriers from participating in the worldwide airline industry trend of consolidation and will result in reduced choice and higher fares for passengers. Air New Zealand has cut its trans-Tasman capacity by 15% over the past two years and the routes have not been profitable on average over the past decade. Mr Fyfe stated further capacity cuts could be made if the deal is not approved. The New Zealand Ministry of Transport is yet to make its own decision on the agreement, with data still being collected.

Air New Zealand: "If we are to earn the right to continue to thrive and grow, then the deal with Virgin Blue is a critical plank of that strategy. Obviously the ACCC's [Australian Competition and Consumer Commission] preliminary findings represents a threat to this strategy, and in fact a threat to our future. Certainly we will struggle to sustain the capacity we have in the market today. The Tasman is our bread and butter and all we are asking from the regulators is they could give us a fair go … According to its website, the ACCC's purpose is to promote competition and fair trade in the marketplace to benefit consumers, business and the community. I don't know about you, but I find that statement of purpose pretty hard to reconcile with the preliminary decision that I believe puts at risk competition within Australia and across the Tasman," Rob Fyfe, CEO. Source: AAP, 23-Sep-2010.