Air NZ papers released on www.treasury.govt.nz

The first tranche of papers relating to the proposed strategic alliance between Air New Zealand and Qantas was posted today on the Treasury website – www.treasury.govt.nz/release/airnz/alliance/

“We are opting for a staggered, electronic release because we want to get the key documents out in the public arena before submissions to the Commerce Commission close on 14 February,” said Finance Minister Michael Cullen, Associate Finance Minister Trevor Mallard and Transport Minister Paul Swain.

The task of pulling together the documentation was extremely time-consuming as the airlines had to be consulted on commercially sensitive information supplied to the government on the basis that it would be treated as confidential.

“While this means the timing is tight, people will have a second opportunity to have input into the Commerce Commission deliberations when the Commission puts out its draft determination for discussion later this year.

“The remaining material will be posted on the website as soon as possible. Media will be advised as each tranche becomes available.

“It was common knowledge that Air New Zealand and Qantas were in discussions for most of last year. But the package was not finalised until the night before it was submitted to the government and announced to the New Zealand stock exchange.

“Officials did a lot of work in advance on how the government should handle decision-making around a potential proposal should one eventuate. This early engagement was necessary, and is normal in such matters, to ensure a smooth process.”

Ministers were kept informed of the broad progress of the negotiations – Dr Cullen by the Treasury and Mr Swain, as Kiwi Shareholder, by the Ministry of Transport and directly by the airlines themselves.

“But our legal advice was that we should not comment publicly because we were subject to the insider trading laws, because the information had been supplied to us under conditions of strict confidentiality, and because any comment might have affected the share prices of Air New Zealand and Qantas. “Also the papers show that any comment would have been speculative as the structure of the proposal changed significantly over time – including the level of shareholding Qantas would buy and the amendments required to Air New Zealand’s constitution.

“The appropriate course was to wait until the negotiations were concluded and we had a formal proposal from the Air New Zealand board. This did not occur until 25 November,” the Ministers said.

“The timetable and phasing for government consideration of the proposed deal was agreed in consultation with Air New Zealand. We needed to take account of Air New Zealand’s views because of its status as a publicly listed company working in a commercial environment.

“However we have been careful to give only conditional support depending on the successful completion of the competition processes and have explicitly reserved the right to reconsider our decision if the proposal is significantly altered or if significant new information emerges.

“We are satisfied at this stage that the proposed alliance will deliver substantial benefits to Air New Zealand as a company and that it satisfies the national interest criteria identified by the cabinet. The competition issues are best assessed by the experts at the Commerce Commission, working within what is one of the toughest pro-consumer regimes in the world,” the Ministers said.

“The most important concern raised in advice to the government about the deal was that, over time, Air New Zealand’s ability to operate autonomously of Qantas might become compromised.

“We were advised that the best way to mitigate against this risk was to protect the company’s ability to quit the alliance at minimal cost. The government has done this via a letter to the Air New Zealand board requesting that it ensure that the direct and indirect costs to Air New Zealand from any future termination of the alliance are minimised and that, in the event of termination, Air New Zealand will be able to operate independently from Qantas within a reasonable period of time.

“The government recognised from the outset that the Air New Zealand – Qantas decision was important to the future of New Zealand’s national airline and to the economy, and was a subject of considerable public interest.

“We have taken great care in our approach to this issue and have put a lot of official resource behind ensuring that the process has worked smoothly and that we have always had access to well-considered and well-informed advice. Anything less would have been irresponsible,” the Ministers said,

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