Australia's competition regulator, on Thursday, approved an alliance between budget airline, Virgin Blue and Air New Zealand, to expand operations between the two Pacific countries, reversing an earlier rejection of the plan. The Australian Competition and Consumer Commission (ACCC) also gave provisional approval to an alliance between Virgin Blue and Abu Dhabi based, Etihad, to expand services to the Middle East.
The regulator said in a statement that the Virgin Blue, Air New Zealand approval would apply for three years and allows the carriers to coordinate prices, revenue management, scheduling, capacity and routes for flights between Australia and New Zealand. The commission rejected the plan in a draft decision in September, earleir this year, but said on Thursday that it had since received more information about the likely effect on customers.
Chairman Graeme Samuel said the Commission had imposed a number of conditions on the deal to address lingering competition concerns. The conditions include a requirement that seat numbers be increased on certain flights to limit the ability of the two airlines to raise fares on the affected routes. "The ACCC considers that the alliance is likely to benefit passengers in a number of ways including more choice of routes and frequencies, and potentially lower fares as a result of cost savings and efficiency improvements," Samuel said.
The deal still requires government approval. In a separate statement, Samuel signaled the regulator was likely to approve a deal between Virgin Blue and Etihad to cooperate on joint pricing and scheduling that would add to the number of seats between Australia and Abu Dhabi. The commission will take further submissions on the deal before making a final decision, a date for which has not been set. Post the announcement, Virgin Blue's share price surged almost 6% to Australian dollars 0.45.