Virgin Australia clears competition hurdle for start of Hong Kong flights

Virgin Australia Airbus A330-200 VH-XFC about to depart Perth Airport for Bali. (Keith Anderson)
Virgin Australia plans to operate Airbus A330-200s to Hong Kong and mainland China. (Keith Anderson)

Virgin Australia has been given the green light to commence ticket sales for its proposed Hong Kong flights after the nation’s competition regulator granted interim authorisation for an alliance with HNA Group and its affiliated carriers.

The Australian Competition and Consumer Commission (ACCC) said on Monday it had granted interim authorisation to the alliance.

“Interim authorisation commences immediately and remains in place until it is revoked or the date the ACCC’s final determination comes into effect,” the ACCC decision said.

The ACCC said it had decided to grant interim authorisation given the tie-up “appears likely to result in some public benefit and limited public detriment”. A final decision was expected in the coming months.

In February, Virgin applied to the ACCC for an alliance with HNA Group and its affiliated carriers. The parties sought interim authorisation to start ticket sales for Virgin’s proposed Hong Kong flights, likely to be from Brisbane, Melbourne or Sydney.

The flights are slated to begin in mid-2017 with Airbus A330-200s, according to the airline’s application to Australia’s International Air Services Commission (IASC) for the necessary traffic rights to serve Hong Kong.

In February, Virgin also announced further details regarding its alliance with HNA Group carriers, Hong Kong Airlines and HK Express, which covers codesharing, reciprocal frequent flyer benefits and cooperation on joint-pricing and scheduling of services between Australia and Hong Kong and Australia and mainland China.

There are also other areas of cooperation to achieve “cost synergies through aircraft scale and utilisation benefits as well as benefits from using catering, ground handling, cargo and other operational benefits”.

The applicants said the alliance would offer travellers more choice and increase competition, noting Qantas and Cathay Pacific had a combined 99 per cent share of passengers and capacity on nonstop services between Australia and Hong Kong in 2015/16.

Virgin also planned to operate between Australia and mainland China, likely to be Beijing. However, no start date has been announced.

The codeshare agreement would cover Virgin Australia, Hong Kong Airlines, Hainan Airlines, Beijing Capital Airlines and Tianjin Airlines’ services between Australia and mainland China and Hong Kong, including services via New Zealand and on routes within HNA Group airlines’ domestic networks, the application said.

However, as bilateral restrictions prevented codesharing between Hong Kong and mainland China, Virgin would offer interline connections from Hong Kong into mainland China.

Hong Kong Airlines is unable to operate to any of Australia’s four major gateway cities – Brisbane, Melbourne, Perth and Sydney – as there is no more capacity for Hong Kong carriers under the current bilateral air services agreement.

Virgin said in a statement to the Australian Securities Exchange on Friday afternoon it welcomed the ACCC’s decision.

“The Virgin Australia Group will announce further detail on the route, on sale date and when flights will commence soon,” the company said.

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