The Australian Competition & Consumer Commission (ACCC) has granted interim authorisation for Virgin Australia and Alliance Airlines to cooperate on 41 regional routes and two short-haul international routes.
The ACCC said its preliminary view is that these arrangements are likely to result in a public benefit by assisting in the re-establishment of Virgin’s national network of routes, thereby promoting competition in airline services.
“The COVID-19 pandemic has significantly disrupted the aviation industry in Australia,” ACCC commissioner Stephen Ridgeway said.
“This interim authorisation will help facilitate a more competitive aviation landscape as Australian consumers resume travelling and demand for flights increases.”
The cooperation will allow Virgin and Alliance to share information and to agree on service capacity, schedules and potentially revenue sharing on the routes on which they operate, including for new routes not currently serviced by either airline.
“Cooperating to provide services on these regional routes will assist Virgin Australia and Alliance Airlines to efficiently manage capacity and quickly respond to increases in demand as travel restrictions ease,” Ridgeway said.
“We acknowledge there is some urgency to this matter. A delay in Virgin Australia fully re-establishing its network, while other airlines are increasing services in response to greater demand as travel restrictions ease, is likely to result in less competitive markets.”
“This is why we have given this arrangement interim authorisation while we consider the substantive application.”
The cooperation will mean that Virgin and Alliance will not compete with each other on the routes covered by the agreement.
“Our preliminary view is that any public detriment resulting from reduced competition between Alliance Airlines and Virgin Australia is likely to be limited, given Alliance Airlines’ limited number of scheduled regular passenger services,” Ridgeway said.
“We will consider this issue further in the course of our review of the substantive application.
“We consider that other airlines, including Qantas Airways and Qantas-owned Jetstar, are likely to compete strongly with Alliance Airlines and Virgin Australia on many of the routes covered by the agreement.”
Commenting on the ACCC’s interim authorisation, a Virgin spokesman said: “As a leading Australian airline, we recognise our role in providing heartland communities and businesses in regional Australia with choice and convenience.
“Through this initiative, we’ll be able to further cooperate with Alliance on new destinations and travel arrangements for customers.
“We look forward to continuing our long-standing relationship with Alliance Airlines.
The interim authorisation comes after both carriers sought approval from the ACCC to cooperate last month.
The cooperation will be key to Virgin’s post-administration rebirth, with new boss Jayne Hrdlicka outlining the carrier’s game plan just yesterday.
It also comes as the ACCC continues to investigate Qantas’ acquisition of a 19.9 per cent stake in Alliance last year, making it the regional airline’s single biggest shareholder.
Having granted interim authorisation on the Virgin-Alliance cooperation, the ACCC is seeking feedback on the substantive application for authorisation.
The competition watchdog is set to deliver a draft determination on the Virgin and Alliance pact in either January or February next year, with a final determination to be handed down in March.
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