Qantas and Air New Zealand (ANZ)have sought to address anti-competitive concerns, particularly on trans-Tasman routes, in their latest bid to win approval for their alliance.

But the partners' new undertakings, submitted to the Australian Competition and Consumer Commission (ACCC) after the body's rejection of their original proposal, fall short of Virgin Blue's demand for ANZ to sell its Freedom Air subsidiary to allow Virgin Blue to compete in the trans-Tasman market.

"The divestiture of Freedom Air should be made a condition of the authorisation becoming effective," says Virgin Blue, which is seen as the only viable new entrant in the trans-Tasman market, and would be interested in purchasing the ANZ subsidiary. "There are no structural undertakings - they are all behavioural, which are hard to enforce," says David Huttner, Virgin Blue's head of strategy.

Qantas and ANZ say selling Freedom Air would be "commercially difficult" because it is an integral part of ANZ's operations, with ANZ guaranteeing its aircraft leases, undertaking administrative functions and sharing labour agreements.

Instead, the partners say they will alter schedules on trans-Tasman routes and provide access for a new entrant to slots, gates, counter facilities, line maintenance services and ground-handling services at airports including Auckland, Christchurch and Sydney for five years.

The partners will not increase capacity on the routes for the first 18 months and for three years Freedom Air will operate across the Tasman only from secondary New Zealand airports. The partners will also lease up to four Boeing 737-300s to the new entrant.

To address consumer concerns, the partners have committed to a five-year price cap across the Tasman, and propose new services, connecting Auckland with Adelaide, Canberra and Hobart, and Wellington-Canberra, with freight services to Auckland and Christchurch.

Source: Flight International