The Mount Cook race

Press, 5 November 1983, Page 16

The Mount Cook race

The battle for control of the Mount Cook Group has entered a critical phase as two of the principal contenders, Air New Zealand and the TNL Group, attempt to convince the Examiner of Commercial . Practices, Mr P. E. Donovan, that their proposals are in the public interest. The examiner has doubts. His provisional view, given on Thursday, is that Air New Zealand’s bid for a 45 per cent shareholding of the Mount Cook Group, and TNL’s aim for a total takeover; are both contrary to the public interest. He has invited both companies to make further representations to him to support their competing claims. If the examiner remains unconvinced, each company has the right to apply to the Commerce Commission for a hearing to settle the question. In considering any share bid that could ultimately lead to a monopoly, or near monopoly, the examiner must weigh the effect that such a move might have on the public. He could: conclude, for instance, that Air New Zealand’s overriding interest in wanting a. greatly increased interest in Mount Cook is to thwart a competitive thrust by the group after the Government’s relaxed domestic aviation policy takes effect in-January. Air New Zealand has strongly rejected such a suggestion and has gone to considerable lengths to emphasise that it sees its role purely as a big brother ready and willing to strengthen the potential of the Mount Cook company and to combine with Mount Cook in promoting travel to, and within, New Zealand. Nevertheless, Air New Zealand must be increasingly conscious of the impact that Mount Cook’s airline .division could make on the domestic, main trunk air routes, particularly if the Mount Cook company were to invest in pure-jet aircraft. The main routes are the ones on which Air New Zealand relies to turn a profit The rest of Air New Zealand’s services, though they feed the main trunk, have commonly run at a loss. Air New Zealand has faced only token competition from Mount Cook. This could change after January 1, if Mount Cook had the desire, and the means, to intrude on the main routes and to service shorter, provincial routes. True to its pioneering heritage, the Mount Cook company was the first to offer generally available advance-purchase fares and led the way with snacks and wine on longer flights. More recently, it upset Air New Zealand by introducing competitive freight services nightly

between Christchurch and Auckland with a stripped-down Hawker Siddeley. The smaller airline is economically run and can be innovative. During the difficult years between 1979 and 1982, Air New Zealand was acutely sensitive about its mounting losses and its dependence on Government support at a time when the Mount Cook Group was consistently returning increasing profits. Mount Cook’s board has made no secret of the fact that it would prefer a closer relationship with Air New Zealand to being taken over entirely by the TNL Group. This is understandable: the board fears, perhaps with some justification and in spite of assurances to the contrary, that the company might ultimately lose its identity, which is important in the travel industry here and abroad.. The board can see merit in accepting a stronger Air New Zealand stake in the company, mainly as a safeguard against further take-over bids. Air New Zealand undoubtedly views its bid as a safeguard also — but a safeguard against the possibility of another company moving in and injecting into the Mount Cook Group sufficient money to buy jet aircraft that could compete effectively on the main domestic routes. From the public’s point of view, a more competitive element in the airline business at all levels might be best, provided that, in the end, the process does not debilitate all the competitors and the country inherits an enfeebled air transport system, serving no-one well. This is the difference between competition and cut-throat competition. Ideally, the new policy will sort out the operators so they all do what they can do best. On the ground, the coach businesses of Mount Cook and TNL could be combined to create efficient, country-wide tour and scheduled services. Alternatively, the combination could become a near monopoly in the private sector, challenged only by the railway coach services. By provisionally indicating that he is not prepared to approve either application as it stands, the examiner will almost certainly find himself under considerable pressure from all parties — including the Mount Cook Group — before his final decision is given on December 5. Before then, the examiner is expected to give his view on the merits of a take-over of the Mount Cook Group by a third company. His opinion on a third company’s application could well determine the outcome.