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Air NZ, Virgin Blue alliance reduces competition, ACCC says

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Sept 10 NZPA - Australian Competition and Consumer Commission (ACCC) has issued a draft determination proposing to deny authorisation for an alliance between Air New Zealand and Virgin Blue, saying it is likely to reduce competition in the trans-Tasman market.

Air New Zealand and Virgin Blue Airlines Group proposed an alliance that involves collaboration on future route and product planning, code sharing and frequent flyer programme benefits.

The airlines said the alliance would deliver cheaper airfares, increase frequency, better connections, and expand lounge access.

ACCC chairman Graeme Samuel said there were a number of trans-Tasman routes where the alliance raised competition concerns.

"These routes account for around one quarter of passenger traffic in the trans-Tasman market. This means that more than one million passengers per year may be adversely affected by the removal of competition between Virgin Blue and Air New Zealand."

The ACCC said it was also concerned that the alliance was likely to increase the likelihood of coordinated conduct on trans-Tasman routes, taking into account the resulting increase in concentration and removal of the constraint posed by Pacific Blue.

Though it accepts that an alliance would have public benefits, such as reduced prices, it said it has doubts about the magnitude of those benefits.

Air New Zealand and Virgin Blue argued their alliance would enable them to compete more effectively against the Quantas-Jetstar group, ACCC said.

But the commission wasn't convinced that it would be more competitive than a scenario where Virgin Blue and Air New Zealand continue to operate independently.

The Centre for Asia Pacific Aviation in April had said that competition implications were complex. The two airlines accounted for all of the trans-Tasman seats available from Dunedin. They also had a large collective share of the market between Cairns and New Zealand.

But trans-Tasman flights to Auckland were well balanced between airlines and the market was highly competitive.

The two airlines filed applications with the ACCC and the New Zealand Ministry of Transport.

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