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Air New Zealand, Quantas link ruled out by regulators

New Zealand's competition watchdog has again rejected applications by Air New Zealand and Australia's Qantas airline to form a commercial alliance.

The Commerce Commission said in a ruling yesterday that the plan "would damage competition and harm consumers and is therefore not in the interests of New Zealanders."

The same ruling was given in the commission's initial finding in April, after which it held a public hearing to hear additional arguments.

Under the alliance plan, the Australian carrier would buy 22.5 percent of Air New Zealand for NZ$550 million (US$330 million).

The commission said it "declined to authorize the proposed acquisition by Qantas of 22.5 percent of the voting equity in Air New Zealand and a strategic alliance between the companies."

Air New Zealand warned in August it could collapse within three to six years as it would be poorly placed to win "a struggle for survival" against Qantas, which is many times bigger.

Australia's Competition and Consumer Commission ruled against the plan on Sept. 9, saying it would stifle competition, raise prices and cut services.

The carriers have appealed the rejection.

Air New Zealand said it would closely examine the New Zealand watchdog's decision and hold talks with Qantas before deciding whether to file an appeal with the country's High Court.

Chief executive Ralph Norris said in a statement he was "extremely disappointed'' its evidence to the regulators ``had counted for little."

Qantas chief executive Geoff Dixon said the airline "still believe[s] an alliance between Qantas and Air New Zealand is in the best interests of aviation in this region and would deliver significant benefits to travelers and tourism."

Both governments support the alliance.
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