Hon Bill English MP National Party Leader

23 October 2003

Govt slapped in the face over air merger

"The Commerce Commission decision to reject the Qantas Air New Zealand merger is a slap in the face for the Government and a victory for the travelling public," says National Party Leader Bill English.

"The Commission has exposed the folly of this Government's support for the merger, which has now been deemed anti-competitive by competition watch-dogs on both sides of the Tasman.

"Worse still, the Government would be selling the taxpayer's Air New Zealand shares for far less than what they're worth today. Essentially Dr Cullen would be handing Qantas a corporate welfare cheque worth more than $100 million.

"After subsidising Toll's rail takeover, the New Zealand Government has done more than enough for the Australian economy this year," Mr English says.

"As a major shareholder in our national airline, Labour must now accept the Commerce Commission decision if it is honestly trying to protect Kiwi air travellers from rising prices through a lack of competition.

"It should abandon any plans for appeal and complete the restructuring that has helped turn Air New Zealand around. Qantas has its own set of problems which our national carrier would inevitably inherit.

"Enough energy and money has been consumed planning for this alliance, which has now been unanimously condemned.

"It's time Dr Cullen accepted this merger's a mistake," says Mr English.

Ends

(Please find attached three extracts from newspaper stories showing the Govt's firm support for the alliance)

Government backs Qantas/Air New Zealand Alliance

- Deputy Prime Minister Michael Cullen told Singapore media that the
alliance was in the "best interest" of Air NZ, which "would find it difficult to survive" a threatened competition war with Qantas. - The Press, 5 September 2003

- Finance Minister Michael Cullen says much of the public debate
around the proposed Air New Zealand-Qantas alliance has been driven by "irrational anti-Australian sentiment".
Dr Cullen said the Government had received advice that the alliance would be good for Air NZ as a company and would improve its profits and long-term viability.
If the deal fell over, Qantas could close its operation here, or -- more likely -- it would enter a "war of attrition" with Air NZ which the New Zealand airline would be hard-placed to win, "even with regular infusions of taxpayer dollars which could be better spent on health and education".
Dr Cullen said the Government could not decide this issue on opinion polls "or succumb to irrational anti-Australian sentiment which seems to be informing much of the public debate".
"Sadly, much of the anti-Australian invective seems to reflect an inferiority complex.
"I am nonplussed by the assumption by many New Zealanders that if there are two Australian directors on the Air New Zealand board, they will somehow surround the eight New Zealand board members and whip the hell out of them." - Waikato Times, 18 January 2003

- But Finance Minister Michael Cullen said critics of the proposal were
ignoring the realities of the airline industry.
"So much of the comment I have seen so far assumes that the present situation would simply remain unchanged if this deal was not approved. That is an extraordinarily unlikely assumption to make in the present situation."
He said the proposal would deliver significant benefits for the company and its shareholders and was the best option for securing Air New Zealand's position as an international airline.
Dr Cullen, Associate Finance Minister Trevor Mallard and Transport Minister Paul Swain said they were confident the Commerce Commission would be able to deal effectively with competition issues. - Dom Post, 19 December 2002

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