Virgin Australia gets ACCC approval for Virgin Atlantic partnership

written by australianaviation.com.au | September 13, 2019
Virgin Australia operates A330-200s to Hong Kong. (Seth Jaworski)
Virgin Australia operates A330-200s to Hong Kong. (Seth Jaworski)

Australia’s competition regulator has approved Virgin Australia’s application to deepen its partnership with Virgin Atlantic on services between Australia and the United Kingdom and Republic of Ireland.

In a draft determination published on Friday, the Australian Competition and Consumer Commission (ACCC) said allowing the two carriers to more closely cooperate was likely to result in public benefits and unlikely to result in any significant detriment to competition in the relevant markets.

“In authorising this cooperation, we expect to see improvements to the carriers’ schedules and services to passengers,” ACCC Commissioner Stephen Ridgeway said in a statement on Friday.

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The green light from the ACCC would enable the two airlines to coordinate in a wide range of areas, such as jointly managing prices, inventory, and marketing strategies, which were not currently permitted in their existing arm’s length codeshare agreement.

Also, the two carriers said they would extend the existing codeshare and reciprocal frequent flyer benefits, which would improve access to and pricing of codeshare inventory and provide passengers with a strengthened loyalty proposition.

In its application lodged with the ACCC in June, Virgin Australia said forging a deeper partnership with Virgin Atlantic was “crucial to the sustainable operation” of its nonstop flights between Australia and Hong Kong.

Figures included in Virgin Australia’s submission indicated the airline’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.

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However, the recent turmoil in Hong Kong due to ongoing public demonstrations has impacted visitor numbers into and out of the Special Administrative Region, with Cathay Pacific reporting a sharp decline in demand and Qantas downgauging some of its services in response to the changed market conditions.

And Virgin Australia has reduced the number of weekly services it operates to Hong Kong, with flight schedules on the airline’s website showing Melbourne-Hong Kong was currently down from daily to four times weekly, while Sydney-Hong Kong was at six times a week, compared with daily previously.

Also, Virgin Australia chief executive Paul Scurrah announced at the company’s 2018/19 full year results – which showed a seventh consecutive annual loss – that management was conducting a review of the airline group’s fleet, network and capacity as part of efforts to return to profitability.

In July, the ACCC granted interim authorisation for the partnership, which allowed the two airlines to begin implementing their alliance immediately ahead of a final determination.

The partnership would build on an existing codeshare agreement that was established in early 2018, when 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.

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

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.

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.

Virgin Atlantic is 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).

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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