Air New Zealand has over the half the market to Australia

Australia's Competition and Consumer Commission (ACCC) has upheld an earlier decision to block any alliance between Air New Zealand and the Australian carrier Qantas.

The commission found on Tuesday that there was no reason to revise its finding in April that such an alliance would raise prices and reduce services.

"The proposed alliance would be highly anti-competitive and offer little benefit to the Australian public," said the ACCC's chairman, Graeme Samuel.

Both Air New Zealand and Qantas said they were disappointed by the finding and would appeal to the Australian Competition Tribunal.

They argue that the alliance is necessary in the light of recent blows to the world aviation market and the rise of competitors such as Emirates.

'Survival'

Mr Samuel found that both Air New Zealand and Qantas were already "profitable and competing strongly".

Air New Zealand earlier argued that it could not survive without the alliance with Qantas.

Qantas, which already flies to New Zealand, has been proposing to buy a 22.5% stake in Air New Zealand for NZ$550m ($276.5m).

Air New Zealand's domestic and international operations would remain independent and take on management of Qantas services to, from and within New Zealand.

The route to New Zealand is Australia's most heavily-used passenger market, with Qantas having a 39% share, and Air New Zealand 52%.

Emirates also flies on the route, and Richard Branson's Virgin Blue is also expected to start operating there.

However, the ACCC ruled that the new competition on the route would not provide a sufficient competitive constraint on the proposed Qantas/Air NZ alliance.