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24 October, 2022

Consumer watchdog may block extension of Virgin-Alliance co-operation

By Alexandra Coulton

Australia’s consumer watchdog is moving to block an extension of Virgin Australia’s charter alliance agreement with Alliance Aviation on fly-in-fly-out (FIFO) services.

In May 2017, the Australian Competition and Consumer Commission (ACCC) approved an agreement between Virgin Australia Regional Airlines (VARA) and Alliance Airlines enabling the airlines to coordinate and jointly bid for and provide, FIFO and value-added services to corporate customers.

Now, the ACCC is seeking further submissions to determine whether the public benefits claimed to result from the agreement five years ago have actually been realised, and also how market conditions have changed in that time.

“At present, the ACCC is not satisfied that the public benefits claimed to arise from combining Virgin Australia’s charter fleet and national regular passenger network with Alliance Airlines’ national charter network are likely to result from the extension of the agreement to the extent claimed by the applicants,” ACCC deputy chair Mick Keogh said.

“The proposed extension of the Charter Alliance Agreement would continue to eliminate competition between VARA and Alliance Airlines in providing FIFO services to corporate customers.”

The ACCC accepts that the Charter Alliance Agreement is likely to result in some operational efficiencies, such as integrating VARA’s and Alliance Airlines’ equipment and fleets, and enhanced services such as access to frequent flyer programs.

“It is unclear whether the likely benefits are sufficiently significant to outweigh the anti-competitive detriment, and whether they will be substantially passed through to or realised by customers,” Keogh said.

“The ACCC wishes to test the public benefit claims made by the applicants further, particularly with FIFO customers.”

“The test for authorisation requires that the ACCC must not grant authorisation unless it is satisfied in all the circumstances that the proposed conduct would result in a benefit to the public that would outweigh the likely detriment to the public from the proposed conduct.”

The ACCC will make its final decision after considering submissions made before 4 November from interested parties on the draft determination. The draft determination and more information on how to make a submission are available on the ACCC public register HERE.

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accc Alliance Aviation fifo fly-in-fly-out Mick Keogh The Australian Competition and Consumer Commission virgin australia