ACCC reverses stance on VB-Air NZ alliance

Cleared to cooperate. (Seth Jaworski)

The Australian Competition and Consumer Commission (ACCC) has given conditional authorisation of the planned alliance between Virgin Blue and Air New Zealand, which will allow them to coordinate on routes, schedules, capacity, pricing and revenue management on the trans Tasman market.

“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,” ACCC chairman Graeme Samuel said.

The ACCC says it still holds reservations over the alliance’s affect on competition on a “number” of trans Tasman routes, in particular routes to and from Wellington, and has imposed a number of conditions as part of its approval. That will see the capacity Virgin Blue and Air New Zealand can offer on those routes limited to restrict their ability to raise fares in those markets.

The ACCC had issued a draft determination in September blocking on the proposed alliance, saying at the time that “more than one million passengers per year may be adversely affected by the removal of competition between Virgin Blue and Air New Zealand.”

Since then, the competition watchdog says it has “received a substantial amount of information from the applicants and interested parties about the likely public benefits and detriments”, and that it  “is now satisfied that the identified public benefits, in combination with the conditions of authorisation, are likely to be sufficient to outweigh any public detriment arising from the alliance.”

The ACCC has approved the licence for a period of three years through to December 31 2013, not the five years sought by the two airlines, as “Given the significant role of the authorisation conditions in the balance of benefits and detriments, the ACCC considers it appropriate to review developments earlier.”

The deal is still pending New Zealand regulatory approval, which is expected within days.

Virgin Blue CEO John Borghetti reacted positively to the news of the ACCC’s decision on the Air New Zealand alliance, and the ACCC’s draft decision to approve Virgin Blue’s Etihad alliance, announced on the same day.

“We are extremely pleased that the way is now cleared for us to create a truly global airline that not only offers a great product and service but also greater frequencies and great value for money fares,” he said in a statement.

Virgin Blue’s trans Tasman flights are operated by its Pacific Blue subsidiary.