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Air NZ disappointed with High Court Decision

Air New Zealand disappointed with High Court Decision

Mon 20 September 2004

Air New Zealand today expressed its disappointment with the decision by the New Zealand High Court to decline the appeal by Air New Zealand and Qantas against the New Zealand Commerce Commission's original decision to disallow the two airlines' application to form a strategic alliance.

Air New Zealand Managing Director and Chief Executive Ralph Norris said that he was disappointed that although disagreeing with the Commerce Commission on many issues, the High Court had not concluded that the airlines' appeal should be upheld.

"The alliance application put forward by Air New Zealand and Qantas has been a complex and challenging process for all concerned. At the time the application for the alliance was first lodged on 9 December 2002, a number of predictions were made about the developing competitive aviation environment.

"While Air New Zealand is in a much stronger position both financially and competitively than when the alliance discussions began, compelling reasons for an alliance still remain with many of our predictions now a reality with ever-intensifying levels of competition in the Australasian aviation market and fares at all time lows.

"Airlines in Europe are facing similar challenges, yet have been given regulatory approval to consolidate to form a more sustainable environment.

"It is disappointing however that the High Court has not allowed Air New Zealand and Qantas to take this opportunity to introduce some rationality into a market that in recent years has been anything but rational. For example, the amount of capacity on Tasman routes is unsustainable. There are simply too many airlines competing for a limited pool of passengers.

"Since the start of the alliance discussions with Qantas over two years ago,
Air New Zealand has been working hard to transform our business to increase the focus on our customers, reduce costs, and to improve our competitiveness. We have made considerable progress as evidenced by the success of our Express services and our recent announcements of significant reinvestment in our long haul product. We have also announced a programme of over 40 initiatives that will progressively deliver annualised savings of $245 million over the next three years.

"While we are disappointed with the appeal decision, Air New Zealand's Board and management believe a robust platform has now been built to enable the airline to continue growing in the short to medium term. While we are cautiously confident that initiatives in train over this period will provide for the long term, given the inherent volatility and intense competition in this industry, this will be a considerable challenge.

"The High Court's decision is very lengthy and we will spend the next several days reviewing it in detail and discussing possible options with Qantas, which may include other forms of an alliance and opportunities that do not conflict with the Commerce Act, before we decide on future steps.

"We will give a more detailed response to the Court's decision at the Company's annual shareholders meeting in Christchurch next month.

"Throughout the course of our alliance discussions and the ensuing legal process, Air New Zealand has established stronger relationships with Qantas which in itself has been a positive outcome," said Mr Norris.

ENDS

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