PAUL PHELAN / CAIRNS & ALEXANDER CAMPBELL / LONDON
Regulators may free up Tasman routes as condition of approving cross-alliance deal
Low-cost Virgin Blue could end up the winner of the proposed Qantas and Air New Zealand (ANZ) tie-up. The move could also spark a turf war between the airlines' respective alliances, Oneworld and Star.
Qantas must pacify Australian and New Zealand regulators wary of its proposed purchase of 22.5% of ANZ, and the price may be the opening of the trans-Tasman duopoly to competition. Under the plan, announced on 25 November, Qantas would buy the stake in three stages for about A$500 million ($282 million). The deal is awaiting approval from ANZ shareholders, including the New Zealand government, which owns 82%, the New Zealand Commerce Commission (NZCC) and the Australian Competition and Consumer Commission (ACCC). New Zealand regulators, who will consider the deal on 9 December, are unlikely to oppose it because of ANZ's weak financial position. "I can't see any positive scenario for ANZ on its own," says aviation analyst Graham Howarth.
But Alan Fels of the ACCC and mergers commissioner Ron Jones are worried about potential monopolies "There will certainly be anti-competitive effects. The question is whether the benefits would warrant them," they say in a statement.
Of concern to the regulators is the virtual monopoly the alliance would hold on trans-Tasman routes. Virgin Blue has threatened to dump long-standing plans to operate to New Zealand if the deal goes ahead without conditions. "We will not walk into a monopoly," says chief executive Brett Godfrey. But Howarth says Virgin Blue "may move into a manufactured vacuum to create new competition on the routes".
The ACCC is also worried about competition on transpacific routes, given the uncertainties surrounding United Airlines, which is threatened by a bankruptcy protection filing. According to OAG schedule data, United and Qantas share the majority of non-stop capacity between Australia and the USA. ANZ and Air Canada also have services but provide a small minority of capacity.
Another factor is that Qantas and ANZ are in rival alliances, making it likely that one of them, most likely ANZ, will have to switch loyalties. "One of the alliances is clearly going to lose...whatever happens," says Howarth. There has also been speculation about the possible involvement of Star member Singapore Airlines in the deal, with suggestions that it could take over the 17% stake that British Airways holds in its Oneworld partner Qantas. However, BA has always said that it would not sell its holding.
Source: Flight International
