Principled Debate On Qantas/Air NZ Called For

Business Roundtable Calls For Principled Debate On Qantas/Air New Zealand

The chairman of the New Zealand Business Roundtable, Rob McLeod, called today for an end to knee-jerk reactions to the proposed partial sale of Air New Zealand to Qantas and instead for a principled debate.

Mr McLeod said that in the Business Roundtable's view the key principles involved were as follows:

€ The government should not be involved long-term in the risky business of owning an airline. Internationally, governments are exiting the airline business. There was no need for the government to end up as a majority owner of Air New Zealand last year if it had acted promptly on the company's proposals for recapitalisation. The cost to taxpayers has been huge. It should sell down its interests at the earliest opportunity.

€ Air New Zealand should be allowed to determine its business strategy on a fully commercial basis without political interference. It is operating in a difficult and highly competitive international environment. It is easy to see the drawbacks of an alliance with Qantas but Air New Zealand's board and management have a duty to pursue the best feasible options to ensure the viability of the company. They should be allowed to exercise their commercial judgment, subject to all relevant regulations, and should be held accountable for their decisions by their shareholders. The company is perfectly entitled to propose a partial sale to Qantas. Any final proposal will have to be approved by shareholders, including the government.

€ At this point the government's role should not be to supplant commercial decision making but to ensure that regulations governing the airline industry in New Zealand are in good shape and that all relevant law is enforced. In this way there should be a presumption that any alliance approved by regulatory authorities is in the national interest.

€ This means, firstly, that the government should examine whether it is imposing any unjustified barriers to entry and competition in relevant markets (domestic, trans-Tasman, long haul) and, if so, remove them.

€ Secondly, the full set of tests under the Commerce Act should be applied. These will be tough to meet. Clearly there will be some lessening of competition but the issue for the Commission will be whether other national benefits outweigh such costs. The airlines obviously believe they do, and they should be allowed to put their case. Other interested parties can do the same. The Commission can approve or decline the proposal, or apply conditions to it. The analysis involved will be complex and political parties should not be pre-judging the outcome. The Commission has statutory independence in order to protect such decisions from political influence.

"Judged in the light of these principles, the government is acting correctly in not pre-empting decisions by the Commerce Commission and its Australian counterpart", Mr McLeod said. "However, the current proposal exposes its conflict of interest as a majority owner of the airline and a regulator in the national interest. The proposal does involve a dilution of the government's shareholding in the company but it should be planning a full exit strategy."

Mr McLeod said that the National Party did not appear to be taking a principled approach to the issue. "Important business issues should not be determined on the basis of hits on a website. It is irresponsible and damaging to New Zealand's business reputation to be seeking to pre-empt the decisions of a statutory watchdog. National's stance is more reminiscent of its interventionist past than its recently stated support for free enterprise, limited government and respect for the rule of law."

Mr McLeod said that the reactions of other opposition parties also seemed to lack a principled basis. "This does nothing for public understanding, our relations with Australia, or New Zealand's reputation as a stable business environment. It is time for due process to be followed and for rational rather than emotional reactions to an important and complex issue", Mr McLeod concluded.

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