ACCC gives go ahead for Virgin Blue/Air New Zealand trans-Tasman alliance

Australia Competition and Consumer Commission (ACCC) issued (16-Dec-2010) a determination granting conditional authorisation for three years for an alliance between Virgin Blue and Air New Zealand on trans-Tasman services. Under the alliance, the airlines would take a coordinated approach to a range of issues including pricing, revenue management, schedules, capacity and routes flown. The commission stated it had received a substantial amount of information from the applicants and interested parties about the likely public benefits and detriments since initially deciding against the alliance, and is now satisfied that the identified public benefits, in combination with the conditions of authorisation, are likely to be sufficient to outweigh any public detriment arising from the alliance. However, ACCC Chairman Graeme Samuel stated the commission is "still concerned that the alliance may affect competition on a number of routes between Australia and New Zealand, particularly routes involving Wellington". As a result, the ACCC has imposed a number of conditions, requiring the airlines to maintain and grow the number of seats flown on the routes where the ACCC has identified competition issues. The conditions are intended to restrict the ability of the alliance to raise fares on these routes by limiting its capacity. The applicants had sought authorisation for five years, but given the significant role of the authorisation conditions in the balance of benefits and detriments, the ACCC considers it appropriate to review developments earlier. As such, the ACCC has granted authorisation until 31-Dec-2013. [more]

Air New Zealand welcomed the move and stated it expects a decision on its alliance application to the New Zealand Minister of Transport within the next few days. [more]

ACCC: "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," Graeme Samuel, Chairman. Source: ACCC, 16-Dec-2010.

Air New Zealand: "I'm pleased that formal approval has been given recognising the benefits this will bring to our customers. I would like to thank the ACCC for its thorough consideration of the issues and coming to a determination that favours customers and will see the Tasman market continue to grow," Rob Fyfe, CEO. Source: Air New Zealand, 16-Dec-2010.