Regulator extends Air NZ-Virgin Australia alliance

Renewal of the airline alliance between Air New Zealand and Virgin Australia has passed its final hurdle.

The Australian Competition and Consumer Commission has issued a final determination granting conditional authorisation for the alliance to continue until October 31, 2018.  The existing agreement is due to expire on December 31.

The draft determination extended the agreement for only three years – compared with five for the rival Qantas-Emirates alliance – but lobbying by the airlines has seen that period extended for nearly five years.

The shorter period was due to ACCC fears that the alliance reduce competition on secondary transtasman routes, such as Christchurch-Melbourne and Christchurch-Brisbane; Wellington-Brisbane; Queenstown-Brisbane; Auckland-Gold Coast; and Dunedin-Brisbane.
So ACCC has imposing conditions that require the airlines to maintain aggregate base capacity across these routes.

“Rather than prescribe a minimum growth factor for these routes, the ACCC considers it appropriate to review the airlines’ capacity additions in light of actual demand growth over the next two years,” the announcement says.  This review will commence on September 1, 2015.

“The ACCC considers that the alliance is likely to result in material public benefits by partnering Virgin Australia’s domestic Australian network and sales presence with Air New Zealand’s domestic New Zealand network and sales presence to contribute to the formation of a second integrated Australasian network,” ACCC Commissioner Dr Jill Walker said.

“The alliance will allow the two airlines to offer enhanced products and services, such as new frequencies and increased access to loyalty program benefits and lounges. This is likely to promote competition on trans-Tasman routes, particularly for business travellers

“The ACCC considers that without the alliance, Virgin Australia’s trans-Tasman operations would be more limited than its key competitors. It also considers that Air New Zealand is likely to be at some competitive disadvantage to the Qantas-Jetstar/Emirates alliance due to its weaker sales presence and more limited access to the domestic market in Australia.”

ngibson@nbr.co.nz