Australia’s competition regulator has given final approval to Virgin Australia and Virgin Atlantic to deepen their partnership on flights between Australia and the United Kingdom and Republic of Ireland.
The final ruling, published on Friday, followed the Australian Competition and Consumer Commission’s (ACCC) draft determination in September that gave the alliance the green light.
“The arrangements which have been authorised will not lessen competition on any route, and are likely to provide public benefits, including through improved scheduling and enhanced loyalty program benefits,” ACCC Commissioner Stephen Ridgeway said in a statement.
The five-year authorisation allowed Virgin Atlantic and Virgin Australia to cooperate by jointly managing prices, inventory and marketing strategies, which were not permitted in their previous arm’s length codeshare agreement.
Also, the two carriers have said previously 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.
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 and Qantas both impacted.
Virgin Australia has also adjusted in Hong Kong schedule. On Wednesday chief executive Paul Scurrah said the airline would end nonstop flights between Melbourne and Hong Kong from February 2020.
Scurrah said Virgin Australia’s Melbourne-Hong Kong flights had “continued to underperform in line with the political landscape”.
In July, the ACCC granted interim authorisation for the partnership.
The partnership built 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. That figure could change from February 2020 when the Australian carrier’s Melbourne-Hong Kong flights ended.
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.
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.