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Wellington Airport concerned about impact of Tasman alliance on Wellington

21 Jun 2010

Wellington Airport has submitted to the Australia Competition and Consumer Commission (ACCC) on the Air New Zealand / Virgin Tasman alliance outlining its concerns about the potential impacts on competition and the Wellington economy.

The information available in the airlines’ application suggests the alliance will be strongly negative for Wellington as it effectively seeks to remove the vigorous competition that has developed on the Tasman over the last few years.

“We are concerned about the potential competition affects of the alliance based on the lessons of the past, and the likely impact on tourism and the Wellington economy posed by a concentrated market,” said Wellington Airport CEO, Steven

Only three airlines operate scheduled trans-Tasman services from Wellington. If the Alliance was to proceed, the number of competitors on the Wellington-Sydney route would fall from three to two, and the Wellington-Brisbane route would have no competition. The potential for additional competition from “5th freedom” carriers is limited in the Wellington market.

Historically, reduced competition on Wellington’s Tasman routes has led to airlines reducing capacity and increasing the lowest available fares.

“Whilst the alliance proposal states potential benefits for business travellers such as better connectivity, schedules and lounge access, reduced competition will most adversely affect the price-sensitive traveller.

“Affordable travel is critical to the wellington region’s economy, and a reduction in passengers on the Tasman would have a direct impact on the tourism industry, especially on inbound tourists who are very sensitive to price and are critical to Wellington’s economy,” added Mr Fitzgerald.

Wellington Airport is also concerned that the New Zealand regulatory approach is not set up to properly assess the alliance application against the impact of a loss of competition.

In Australia, the ACCC will go through a test which weighs competition and the net benefits claimed by the airlines. However, in New Zealand, the Civil Aviation Act exempts at least part of these arrangements from assessment under
competition law – and does not have any net benefits test.

“That New Zealand operates differently than most other OECD countries in the area of competition law, by not performing a net benefits test, means the potential adverse impacts on the travelling public will not be properly
scrutinised,” said Mr Fitzgerald.
Wellington Airport’s submission to the ACCC can be viewed here.

Issued by: Wellington International Airport Limited
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