There’s a new twist in the industry’s musical chairs battle over FIFO services after the ACCC indicated it would be unlikely to support extending Alliance’s current deal to cooperate with Virgin.
The regulator said in a draft determination that it’s not satisfied that the benefits of the current tie-up outweigh the damage to competition.
The situation is complicated because Qantas has agreed a deal to purchase Alliance, and should that deal be cleared by the ACCC, then the agreement between Alliance and Virgin would likely end. The ACCC, though, has also raised preliminary concerns that the Qantas purchase would lessen competition.
The existing deal between Virgin and Alliance began in 2017 and was authorised for five years. An interim extension was then granted in June while the ACCC continued to consider the case.
On Friday, ACCC deputy chair Mick Keogh said, “At this stage, the ACCC is not satisfied that the public benefits likely to result from the Charter Alliance Agreement in the next five years will outweigh the public detriment that is likely to result from VARA and Alliance Airlines coordinating their fly-in fly-out (FIFO) services.
“The proposed extension of the Charter Alliance Agreement would continue to eliminate competition between VARA and Alliance Airlines in providing FIFO services to corporate customers.
“The ACCC seeks further submissions to assist it to understand whether the public benefits claimed to result from the agreement by the applicants five years ago have actually been realised, and also how market conditions have changed in that time. This will help to inform our forward-looking assessment of the likely public benefits and detriments.
“At present, the ACCC is not satisfied that the public benefits claimed to arise from combining Virgin Australia’s charter fleet and national regular passenger network with Alliance Airlines’ national charter network are likely to result from the extension of the agreement to the extent claimed by the applicants.”
The ACCC said it “accepts” an extension to the deal between Virgin and Alliance would result in “some operational efficiencies, such as integrating VARA’s and Alliance Airlines’ equipment and fleets, and enhanced services such as access to frequent flyer programs”.
However, Keogh added in a statement that it’s “unclear whether the likely benefits are sufficiently significant to outweigh the anti-competitive detriment”.
“The ACCC wishes to test the public benefit claims made by the applicants further, particularly with FIFO customers.
“The test for authorisation requires that the ACCC must not grant authorisation unless it is satisfied in all the circumstances that the proposed conduct would result in a benefit to the public that would outweigh the likely detriment to the public from the proposed conduct.”
Virgin told Australian Aviation in response it “remains confident in the significant public benefits” of the deal.
“We will continue to work closely with the ACCC and Alliance to provide further information to address the gaps identified by the regulator,” a spokesperson said.
“The Charter Alliance continues to operate under the interim authorisation, and we remain focused on providing enhanced service to our FIFO customers through this alliance.”
The ACCC is now seeking submissions on the draft determination by 4 November.
It comes following a breathless period for the FIFO sector with Rex purchasing FIFO operator Cobham, which has been cleared by the ACCC.
Major airlines are looking to invest in reliable FIFO (fly in, fly out) services during the difficult post-pandemic recovery.