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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?

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?

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.

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