Air New Zealand / Qantas

This is a good debate. It is good that we are having a discussion in the House about the problems of the Australian takeover of much of New Zealand industry, in communications, banking, etc.

During the last parliamentary term I was on the select committee that held an inquiry into closer economic relations with Australia. One of the problems that arose in that inquiry, and in the general debate in the Parliament around those questions, was the ideological stance taken, that we all live in one Australian and New Zealand community now and it does not matter how much of our industry or how much of our economy is taken over by Australia, because we are all much the same; we have this nice agreement. Insufficient consideration was given to the downside of some of those takeovers.

There was not a proper objective look at the upsides and the downsides, and very little information or research statistics available on the effect on the New Zealand economy as a result of takeovers, the head offices of companies moving to Australia, often the manufacturing operations moving to Australia, and also the unfair subsidies that the Australian Governments, and State Governments in particular, give to their local industries in their so-called competition with New Zealand industries.

So in that context it is good that we are having this debate today. When we look at Qantas, what we do know? We know that Qantas has been a very aggressive operator. There was talk at one point about how it wanted to get rid of Air New Zealand. I think it was the head of Qantas who effectively said that. More recently the head of Air New Zealand, John Palmer, talked about a $40 million predatory pricing suit against Qantas because of its low cut-price fares on New Zealand routes – loss-making activities that he did not consider to be fair competition.

What is Qantas, as an Australian firm, going to do? It is going to work very closely with its own Government, the Australian Government, to ensure its own survival in this competitive airline market internationally, to ensure its own maximisation of profit and to enhance what it sees as Australian interests. It will work together with the Australian Government. Those interests are not necessarily the same as ours.

I do not think we can rely on goodwill from Qantas or from the Australian Government. Sure, there is a large degree of trust at the present time between the management of Qantas and the management of Air New Zealand, and of course it is in their interest. Qantas is being sugary sweet to the Government here, to Air New Zealand, etc. to get its foot in the door and to go through all the hoops that are required for this effective merger to take place. What it is doing, in the process, is getting access to all the confidential information from Air New Zealand, which perhaps it can use against Air New Zealand further down the track when the going gets tough. It is just as the wolf said to Little Red Riding Hood: “It’s all in your interests.” I think in this case Qantas is taking the approach of “all the better to eat up Air New Zealand when the time comes.”

Qantas chairwoman, Margaret Jackson, says that this is a partnership of equals, but it is not really. Qantas carries 23 million passengers on 193 aircraft, whereas Air New Zealand carries 9 million passengers on 83 aircraft. Qantas is having a lot of control. A Qantas director will have to be present at any Air New Zealand board meeting, and Qantas constitutes 50 percent of the group that will determine pricing, scheduling, marketing, trans-Tasman routes, New Zealand routes, and routes in and out of New Zealand airports. It is true that a considerable amount of the operational stuff will go to Air New Zealand, there will be people in Air New Zealand uniforms doing a lot of the operational functions. However, I do not think that is the most important point.

The most important point is who has the actual control. Under this arrangement, Qantas has quite a bit of control over the joint operations, with Air New Zealand with only 22 percent control. Of course, we have been presented with a rather grandiose dream that profits are going to go up, prices will come down, there will not be any staff reductions – an increase, even – and services will all stay the same or improve. Of course, Michael Cullen has told us today that the New Zealand Government will make sure that all these things are done, that New Zealand interests are served, and that prices will not go up, to the disadvantage of New Zealand, etc. but I do not really see how he can ensure that, in practice, with a private company like Qantas that has effective control of Air New Zealand.

There are different interests. The people in the tourism sector talk about this and say that it may be in Quantas’ interests to make sure that most of the international passengers coming into this area of the world go mainly to Australia. Short-stay passengers in particular may come into Australian airports and cities, rather than New Zealand’s, and that may be the more profitable way for Qantas to go, and it may be supported in that endeavour by the Australian Government.

Also, in terms of tourism promotion, I think it is useful that at the moment tourists are coming in through the two international alliances, OneWorld and Star Alliance. I cannot see other than, with this arrangement, we are going to end up with the Qantas – Air New Zealand merged group effectively being in only one alliance, which will reduce the number of passengers coming in through the other alliance.

Why are we doing this right now? It is at a time when Air New Zealand is recovering from a very bad period. It has gone through changes in the domestic routes. It has streamlined them and dropped the fares, which is very good, although there were a few problems with Air New Zealand today in terms of myself getting here. It was not the fault of Air New Zealand; I think it was caused by the Wellington weather. I know that more and more MPs are now entering the Chamber, after very long air travel to unfamiliar destinations like Palmerston North, like myself and my good friend here from New Zealand First.

Air New Zealand is on the up and up, and that is good. It has had Government backing, and the Greens supported the Government getting involved in this way. New Zealand investors are willing to put their money into Air New Zealand. It does not need to go down this panic track of an effective takeover by Qantas. Sure, it is important that Air New Zealand cooperates with other airlines around the globe, and the link to Australia and the Australian market is very important in terms of cooperative relationships. I think the fact that there is a significant Government shareholding, and that Air New Zealand is not going to fall over, gives the company the confidence to go into relationships with other airlines in a very productive way. We are in a difficult airline environment, and that cooperation is required.

But I cannot see how Michael Cullen is going to deliver on his guarantees, because when the crunch comes the new Qantas – Air New Zealand company, effectively the Qantas company, may come to him and say: “Well look, we just can’t operate in New Zealand without an increase in fares.” At the moment, of course, the Air New Zealand line is that it operates by reducing fares and increasing patronage, and makes money in that way. At a certain point Qantas might argue the other way, that most people have to travel by air anyhow, for business or family reasons, or whatever, so even though by putting up the fares we might have a slight reduction in traffic, overall our profits will be higher, which is how some companies operate, particularly when they have a more monopoly situation.

How is the Government going to dictate otherwise to Qantas – Air New Zealand? There may be problems in other things, like tourism routes or services to smaller towns. It is very important that we do have services to the smaller towns in New Zealand. When the bullet is put to the Government’s head by Qantas and Air New Zealand, how will it enforce the preservation of those routes? The air freight operations are extremely important, particularly for our horticultural industry. How will the Government make sure that those are retained, when we have an essentially Australian airline, Qantas, operating according to Australian interests, and subject to pressures from the Australian Government, rather than ours?


Parliament – Urgent Debate on Air New Zealand sale