United's NZ pullout imperils Qantas deal

United, the world's second largest airline, filed for bankruptcy protection in the United States last month. On Friday it said it was pulling out of New Zealand, and its 96 employees there would be made redundant.

The move prompted New Zealand's opposition National Party to claim there was ``no way the Commerce Commission could now approve the deal if it were truly looking after the interests of the New Zealand traveller and Kiwi businesses". Qantas has applied to buy 22.5 per cent of Air NZ for $520 million.

Competition authorities on both sides of the Tasman have yet to decide on the proposal's future. The New Zealand Government, Air New Zealand's principal shareholder, gave its agreement in principle to the deal just before Christmas.

The acting chief executive of Qantas, Peter Gregg, said the issue went beyond competition on a single route. ``United said its Auckland flights had suffered from falling passenger numbers and low fares that made its service unprofitable," he said.

``Everyone should be wary of trying to engineer an artificial competitive outcome in the face of this reality." There was nothing to stop others starting rival services on the route, he said.