Air New Zealand Managing Director and Chief Executive Ralph Norris said that he was disappointed that although disagreeing with the Commerce Commission on many issues, the High Court had not concluded that the airlines' appeal should be upheld.

"The alliance application put forward by Air New Zealand and Qantas has been a complex and challenging process for all concerned. At the time the application for the alliance was first lodged on 9 December 2002, a number of predictions were made about the developing competitive aviation environment.

"While Air New Zealand is in a much stronger position both financially and competitively than when the alliance discussions began, compelling reasons for an alliance still remain with many of our predictions now a reality with ever-intensifying levels of competition in the Australasian aviation market and fares at all time lows.

"Airlines in Europe are facing similar challenges, yet have been given regulatory approval to consolidate to form a more sustainable environment.

"It is disappointing however that the High Court has not allowed Air New Zealand and Qantas to take this opportunity to introduce some rationality into a market that in recent years has been anything but rational. For example, the amount of capacity on Tasman routes is unsustainable. There are simply too many airlines competing for a limited pool of passengers.

"Since the start of the alliance discussions with Qantas over two years ago,
Air New Zealand has been working hard to transform our business to increase the focus on our customers, reduce costs, and to improve our competitiveness. We have made considerable progress as evidenced by the success of our Express services and our recent announcements of significant reinvestment in our long haul product. We have also announced a programme of over 40 initiatives that will progressively deliver annualised savings of $245 million over the next three years.

"While we are disappointed with the appeal decision, Air New Zealand's Board and management believe a robust platform has now been built to enable the airline to continue growing in the short to medium term. While we are cautiously confident that initiatives in train over this period will provide for the long term, given the inherent volatility and intense competition in this industry, this will be a considerable challenge.

"The High Court's decision is very lengthy and we will spend the next several days reviewing it in detail and discussing possible options with Qantas, which may include other forms of an alliance and opportunities that do not conflict with the Commerce Act, before we decide on future steps.

"We will give a more detailed response to the Court's decision at the Company's annual shareholders meeting in Christchurch next month.

"Throughout the course of our alliance discussions and the ensuing legal process, Air New Zealand has established stronger relationships with Qantas which in itself has been a positive outcome," said Mr Norris.

NOTE: The content of all Air New Zealand media releases are accurate at the time of issue, as stated at the top of each release. For updates on any changes, please contact Air New Zealand.

Air New Zealand is proud to be a member of Star Alliance. The Star Alliance network was established in 1997 as the first truly global airline alliance to offer worldwide reach, recognition and seamless service to the international traveller. Its acceptance by the market has been recognised by numerous awards, including the Air Transport World Market Leadership Award, Best Airline Alliance by both Business Traveller Magazine and Skytrax. The member airlines are: Adria Airways, Air Canada, Air China, Air New Zealand, ANA, Asiana Airlines, Austrian, Blue1, bmi, Continental Airlines, Croatia Airlines, EGYPTAIR, LOT Polish Airlines, Lufthansa, Scandinavian Airlines, Shanghai Airlines, Singapore Airlines, South African Airways, Spanair, SWISS, TAP Portugal, Turkish Airlines, THAI, United and US Airways. Aegean Airlines, Air India, Brussels Airlines and TAM have been announced as future members. Overall, the Star Alliance network offers 19,500 daily flights to 1,071 airports in 171 countries.

For more information about Air New Zealand visit www.airnewzealand.com and for more information about Star Alliance visit www.staralliance.com.