The Australian Competition and Consumer Commission has issued a determination granting conditional authorisation for three years for an alliance between Virgin Blue and Air New Zealand in relation to their flights between Australia and New Zealand (the Alliance).
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 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," ACCC chairman Graeme Samuel said.
"The ACCC is still concerned that the Alliance may affect competition on a number of routes between Australia and New Zealand, particularly routes involving Wellington. However, the ACCC has imposed a number of conditions on authorisation which are designed to address these competition concerns."
Broadly speaking, the conditions require 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 ACCC previously issued a draft determination proposing to deny authorisation for the Alliance. Since then, the ACCC has received a substantial amount of information from the applicants and interested parties about the likely public benefits and detriments.
The ACCC 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.
The applicants sought authorisation for five years. 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 December 2013.
Authorisation provides immunity from court action for conduct that might otherwise raise concerns under the competition provisions of the Trade Practices Act 1974. Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit from the conduct outweighs any public detriment.
The ACCC's determination will be available from the ACCC website.