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Virgin Australia gets green light to deepen Virgin Atlantic partnership

written by australianaviation.com.au | July 5, 2019
A file image of Virgin Australia aircraft at Sydney Airport. (Rob Finlayson)
A file image of Virgin Australia aircraft at Sydney Airport. (Rob Finlayson)

Australia’s competition watchdog has given Virgin Australia the go-ahead to establish a deeper partnership with Virgin Atlantic on flights between Australia and the United Kingdom and Ireland.

The Australian Competition and Consumer Commission (ACCC) said on Thursday it had granted interim authorisation for the tie-up.

Interim authorisation would allow the two airlines to start implementing their alliance immediately, ahead of a final determination.

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“We do not think this enhanced cooperation is likely to lessen competition on the routes between Australia and the British Isles,” ACCC Commissioner Sarah Court said in a statement.

The application to the ACCC lodged in June said the two carriers sought authorisation for a long-term cooperation agreement that involved working together on joint pricing, inventory management, scheduling coordination, network planning and marketing, as well as product alignment, airport operations, joint procurement and tenders for corporate contracts.

The partnership would build on an existing codeshare agreement that was established in early 2018, where Virgin Atlantic placed its VS airline code on Virgin Australia’s nonstop flights from Australia to Hong Kong and Los Angeles. Virgin Atlantic also codeshares on a number of Virgin Australia’s domestic services.

Similarly, Virgin Australia placed its VA airline code on Virgin Atlantic-operated nonstop flights from Hong Kong and Los Angeles to London Heathrow.

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The application said Virgin Australia and Virgin Atlantic had a combined market share of about three per cent in the Australia-United Kingdom/Ireland market, compared with about 40 per cent held by the combined Emirates/Qantas alliance.

Further, the two carriers told the ACCC they flew 13,000 codeshare passengers in 2018, with the figure expected to increase to 18,000 in 2019. This represented 24 passengers daily each way.

Market share figures in the Australia-United Kingdom market from the application. (Virgin Australia)

The ACCC said in its decision it was unlikely that any interested party would be harmed if interim authorisation was granted.

“It also appears likely that the enhanced coordination will result in some public benefits for consumers,” the ACCC decision said.

Virgin Australia said it was pleased to have received approval to forge deeper ties with Virgin Atlantic.

“This is great news for customers who will be able to experience more competitive pricing on flights between Australia and the UK/Ireland via Hong Kong or LA and enhanced reciprocal frequent flyer arrangements, amongst other benefits,” a Virgin Australia spokesperson said on Friday.

“We’re looking forward to providing guests with a unique Virgin experience all the way to the UK/Ireland via Hong Kong or LA, with further details about the arrangement to be shared in the coming months.”

Virgin Australia began nonstop services between Melbourne and Hong Kong in July 2017 with Airbus A330-200s. Nonstop Sydney-Hong Kong flights, again with A330-200 equipment, commenced in July 2018.

The flights are operated as part of an alliance with a number of HNA Group carriers, of which Hong Kong Airlines is one.

Figures included in the application indicated Virgin Australia’s Hong Kong services had average load factors – an industry term to indicate how full the flights are – of about 66 per cent, while its market share sat at about 10 per cent.

“By driving passenger feed, it will assist Virgin Australia to more sustainably operate its Australia-Hong Kong services in competition with Qantas and Cathay Pacific,” the application said.

“More broadly, authorised cooperation and alliances of this kind are crucial to Virgin Australia’s ability to offer an international network and establish itself as a second full service airline for Australian passengers, promoting choice and competition.”

Virgin Australia Airbus A330-200 VH-XFD operating the inaugural VA87 from Melbourne to Hong Kong on July 5 2017. (Virgin Australia)
Virgin Australia Airbus A330-200 VH-XFD operating the inaugural VA87 from Melbourne to Hong Kong on July 5 2017. (Virgin Australia)

Meanwhile, Virgin Australia’s flights from Brisbane, Melbourne and Sydney to Los Angeles with Boeing 777-300ER equipment are operated as part of a joint-venture alliance with Delta Air Lines.

The application said Virgin Atlantic’s services from London Heathrow to Hong Kong and Los Angeles had load factors of about 85 per cent and 83 per cent, respectively.

Should it be approved, Virgin Atlantic would be Virgin Australia’s third alliance partner on Australia-United Kingdom routes alongside existing partnerships with Etihad Airways (via Abu Dhabi) and Singapore Airlines (via Singapore).

The application said the proposed cooperation with Virgin Atlantic would be complimentary to those existing partnerships, given Virgin Australia had “no influence over pricing” of Etihad Airways’ and Singapore Airlines’ flights.

Also, it said Virgin Australia’s Hong Kong flights were not part of its alliances with Etihad Airways or Singapore Airlines.

Virgin Atlantic last served Australia with its own aircraft in 2014 as part of a London Heathrow-Hong Kong-Sydney routing with Airbus A340-600 equipment.

Its withdrawal left British Airways as the only European carrier flying to Australia with its own aircraft.

A 2006 file image of a Virgin Atlantic A340-600 taking off from Sydney Airport. (Seth Jaworski)
A 2006 file image of a Virgin Atlantic A340-600 taking off from Sydney Airport. (Seth Jaworski)

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