Tuesday, January 25, 2011

Queenstown Aiport Case: Air New Zealand VS Auckland Airport

On news that Auckland Airport Ltd [AIA.NZX] have secured a deal for China Southern Airlines to begin flights between Guangzhou and Auckland starting in March because of Auckland Airport's deal with Queenstown Airport at the end of 2010, we must revisit Air New Zealand Ltd [AIR.NZX] opposition to the marriage between Queenstown and Auckland Airports, especially in the light of the recent purchase by AIR of nearly 15% of Virgin Blue Holdings Ltd [VBA.ASX] last week.

Air New Zealand's Rob Fyfe and Bruce Parton last year indicated his airlines opposition to the AIA/Queenstown merger was because of their monopoly status and the "anti-competitive" nature of the company the port already had and the purchase of 27.7% of Queenstown Airport would cement that monopoly.

There are also several businessmen in Queenstown in opposition to the merger and factions within the Queenstown Council, who own the majority of the Queenstown port.

Apart from the clear benefits that the Chinese Airline will have on the New Zealand economy, benefits that I initially was dubious about last year when the deal was announced, the added revenue for AIA is going to be good for shareholders, especially as this route looks like it will develop further over the long term.

For Air New Zealand to continue their case in the Christchurch High Court is to be guilty of hypocrisy of the highest order.

While you may agree that Auckland Airport has a monopoly - it indeed does and that is why I am a shareholder, AIA's purchase of Virgin Blue is pretty much the same deal as engineered by AIA/Queenstown and also cements, for AIR, a history of anti competitive behavior in the Airline business in this part of the world and specifically the stranglehold they have on flights into the booming Queenstown tourism sector.

For them it is about protectionism of their near monopoly in Queentown and the benefits this has on their routes out of that port and Auckland Airport as well.

In effect they are attempting to do the same as Auckland Airport.

Don't expect AIA to take a court case against AIR though.

You wouldn't expect less from a quasi Govt Department though with taxpayer dollars bankrolling them.


Disclosure I own AIA shares in the Share Investor Portfolio


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