Cullen on Air NZ - Transcript Of Press Conference
Hon. Dr Michael Cullen on Air NZ.
Press Conference Called
On Commerce Commission Determination
23rd October
2003
As majority shareholder in the airline, we’re disappointed but not surprised by the decision. I reaffirmed to Mr Palmer this afternoon that the govt will not be interfering in the decision, that we will be abiding by the legal process. Air NZ will be considering its options in terms of legal appeal along with Qantas and obviously we will not be interfering in that decision either.
My best guesstimate on the back of my collar is that the NZ public has lost roughly $100 million since the announcement was made in terms of the fall in the share price of Air NZ.
What worries you as majority
shareholder?
We’ve never had in the past 2 airlines
making a profit in NZ competing on the main trunk route and
we now face the prospect of 3 airlines competing on the main
trunk route. The Commerce Commission has issued a vote of
confidence that Air NZ will succeed in doing this but of
course they’re not responsible for making it happen. I do
note their comment that the govt will remain a shareholder
and would underline their comment that the govt is not
necessarily committed to just providing endless capital in
order to allow this competition to occur.
Question
unclear.
I have very expectation that with people like Mr
Palmer and Mr Norris in charge, if no appeal is taken and
this is what happens, that Air NZ will make every effort to
make a go of it and maybe somebody else will have to
withdraw from the field but I repeat that I’m totally
unconvinced that 3 airlines can make a profit competing in a
market this small on the main trunk line. In Canada when 2
airlines tried to do it they had to actually merge.
Do you
think the public should be prepared to wear the increase in
fares?
Well the Commission decided not to change its
numbers terribly much. It appeared not to take much notice
of the severe criticisms that were made of the methodology
its staff used. No doubt Air NZ is looking at that as part
of what might be the basis of any appeal though of course
the appeals in NZ are significantly narrower than the basis
for appeal in Australia.
You don’t agree with the price
rise assumption?
I’m not going to get into the details
except to say that I’m a bit surprised the Commission did
not take more notice of the very powerful criticisms that
were made by extremely prominent international
economists.
Will you intervene?
No.
Why
not?
Because that would mix up all the various roles the
govt has in this matter.
Are you going to do anything to
change the way the ComCom operates?
No.
You set the
Commission up to be independent, now you’re criticising
it.
The fact you’re independent doesn’t mean you’re
infallible.
Isn’t it your job to protect the country’s
wider interests?
We said right from the start that we
were not in the position to make the overall competitive
judgement. We had to leave that to the Commerce Commission.
As so often in legal matters, the fact that you lose a
decision doesn’t mean you then like it. You lump it if
necessary.
Are you expecting the govt will have to put
more money in as a result of this decision?
Not
necessarily so. There is a further issue of $150 million
but it’s never been decided at this point whether it would
be taken up by an extra rights issue to the govt or whether
Air NZ will go to the market.
What are the govt’s
long-term plans for Air NZ now?
We believe that Air NZ
does need a strong long-term committed shareholder and that
is the NZ govt, there is no-one else who can perform that
role and to ensure that we have direct access into a range
of crucial overseas markets for NZ in trade, tourism and
other matters.
There may be another suitor down the
track.
I’ve often said in the past that there is the
possibility of a corner stone shareholder. We had hoped of
course that that was going to be Qantas. There have not
been many other suitors wandering around with formal gear on
and a ring.