Business offers qualified support on Air NZ deal

Provided the incentives established under the Air New Zealand/Qantas Joint Service Agreement work as intended, to maintain competitive pressures on passenger and freight routes, the Employers & Manufacturers Association (Northern) says it will support the plan.

"On behalf of business customers, the Employers & Manufacturers Association will be holding Air New Zealand to account to ensure flight frequency and pricing impacts on passenger and freight rates are delivered," said Alasdair Thompson, EMA's chief executive.

"Business accepts Air New Zealand has no alternative but to enter an agreement like this with Qantas if it is not to become a permanent recipient of tax payer subsidies.

"This may be the only viable way forward for Air New Zealand if it is to meet its strategic aims. In the end neither New Zealand nor Air New Zealand have many choices considering our smallness, our Slovenia level of GDP, and the state of the Air New Zealand balance sheet.

"For Air New Zealand to remain viable commercially it must achieve on three fronts:

· maintain its strength on domestic routes,

· develop stronger trans Tasman links with feeder services from and to Australia, and

· eliminate its losses on its long haul routes.

"The deal with Qantas appears a balanced way forward whereby all three strategic objectives can be achieved.

"In exchange for the 22.5 per cent shareholding of Qantas in Air New Zealand and the lessening of competition domestically and across the Tasman, we are pleased at the prospect of the positive outcomes mooted.

"The extra engineering work Qantas will require of Air New Zealand could amount to an extra 200 high skill jobs, while an extra 50,000 visitors could be made available by Qantas through its trans Tasman links.

"Nonetheless the plan's success or failure rests on whether market competition can be sustained, for New Zealand as a destination to retain its price appeal and our airfreight remains competitive domestically and overseas.

"The JSA's competitive framework provides that the airline demonstrating it is the most cost effective on any route will be the one permitted to expand on that route. We are relying on the Commerce Commission to determine whether this proposal will be adequate to incentivise ongoing competition.

"If, despite the assurances of Air New Zealand Chief executive Ralph Norris and chairman John Palmer, things prove otherwise, we will be vocal in noting our opposition to any lack of capacity or price increases.

"As much as price regulation is disliked we will call for it at the first sign of anti-competitive behaviour."

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