Air New Zealand says ACCC "killing competition" on trans-Tasman

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Air New Zealand has criticised Australian regulators for focusing on the short term by rejecting its application to form a trans-Tasman joint-venture with the Virgin Blue Group.

The carriers are keen to coordinate their services, including schedules, and having reciprocal frequent flyer agreements, on routes between Australia and New Zealand.

But that was rejected by the Australian Competition and Consumer Commission on 10 September, with the agency saying that an alliance is not "more competitive" then when Virgin Blue and Air New Zealand operate independently. The carriers are appealing the decision, and a final decision is expected by year-end.

"The body charged with promoting competition is at serious risk of killing it off," ANZ CEO Rob Fyfe said in Sydney on Wednesday. While pulling out totally "is not an option", Fyfe says that his airline will not continue operating under the existing rules and could cut some services if the appeal is rejected

"On average over the last decade, we haven't made any money on the Tasman," he says. "We will not continue to lose money for our shareholders."

ANZ and Virgin Blue, the Tasman's largest and third-largest carriers, would have a combined 56% market share with the alliance. Qantas Airways and its low-cost subsidiary Jetstar Airways would have 32%, according to the ACCC. Fyfe argues ANZ and Virgin Blue need to create a counterbalance to the Qantas Group, which is closing in on market share.

While Pacific Blue's market share rose to 16% last year from 8% in 2006, the Qantas Group's fell to 32% from 34% and ANZ's fell to 40% from 46%.

"This declining competitive position will continue in the void of Virgin Blue and Air New Zealand allowed to form this alliance," says Fyfe.

ANZ and Virgin Blue are also under threat due to their smaller regional and international networks than the Qantas Group, Fyfe says.

"The ACCC appears to hold the view that allowing an increasingly dominant Qantas and Jetstar group to marginalise two smaller airlinesgives a bigger competitive outcome," Fyfe says. "We hold a contrary view."

Fyfe says if the ACCC upholds its preliminary decision, ANZ and Virgin Blue will evaluate smaller-scale cooperation on both sides of the Tasman where there is no competition. Any initiative would require competitive authority approval, he adds.