Virgin Blue and Air New Zealand have been given conditional authorisation by the Australian Competition and Consumer Commission to create an alliance on flights between Australia and New Zealand.
The Virgin Blue – Air New Zealand alliance at this stage extends for three years, with the two airlines required to make their case to the ACCC to continue the alliance after that point. Under the alliance, Virgin Blue and Air New Zealand will take a coordinated approach to a range of issues including pricing, revenue management, schedules, capacity and routes flown between Australia and New Zealand.
ACCC chairman Graeme Samuel believes the Virgin Blue and Air New Zealand alliance is likely to benefit customers, however the ACCC still has some concerns.
“The ACCC considers that the Alliance is likely to benefit passengers in a number of ways including more choice of routes and frequencies, and potentially lower fares as a result of cost savings and efficiency improvements,”
“The ACCC is still concerned that the Alliance may affect competition on a number of routes between Australia and New Zealand, particularly routes involving Wellington. However, the ACCC has imposed a number of conditions on authorisation which are designed to address these competition concerns.”
Broadly speaking, the conditions require the airlines to maintain and grow the number of seats flown on the routes where the ACCC has identified competition issues. The conditions are intended to restrict the ability of the Alliance to raise fares on these routes by limiting its capacity.
The ACCC previously issued a draft determination proposing to deny authorisation for the Alliance. Since then, the ACCC has received a substantial amount of information from the applicants and interested parties about the likely public benefits and detriments.
Virgin Blue previously shut down its Pacific Blue offshoot in New Zealand due to changing market dynamics, the Alliance with Air New Zealand may see the carrier return to some routes.
Virgin Blue has also been given draft approval by the ACCC for an alliance between Virgin Blue and Etihad.
