Virgin Blue and Air New Zealand alliance wins approval

Air New Zealand and Sir Richard Branson’s Virgin Blue have won approval to co-operate on trans-Tasman routes despite lingering competition concerns.

The Australian Competition and Consumer Commission agreed that the two airlines can co-ordinate pricing, revenue management, schedules, capacity and routes between Australia and New Zealand in an agreement that will run for three years.

It said it had given a conditional green light to the tie-up on the lucrative routes after earlier objections had been overcome, but stressed that some competition worries remained.

“The ACCC is still concerned that the alliance may affect competition on a number of routes between Australia and New Zealand, particularly routes to the New Zealand capital Wellington,” said chairman Graeme Samuel.

“However, the ACCC has imposed a number of conditions on authorisation which are designed to address these competition concerns.”

He said 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”.

The airlines will have to maintain and increase the number of seats available on the routes where the watchdog has concerns, in order to restrict the carriers’ ability to hike fares by reducing capacity.

Authorisation for the tie-up will last until December 31, 2013, less than the five years the two carriers had been seeking.

The ACCC also proposed granting authorisation for an alliance between Virgin Blue and Abu Dhabi-based Etihad, allowing the two airlines will co-operate on pricing and the scheduling of services.

It would allow Virgin Blue’s long-haul subsidiary V Australia to start flights between Sydney, Brisbane and Abu Dhabi early next year.

Virgin Blue group chief executive John Borghetti referred to the tie-ups as “truly game-changing alliances.

“We are extremely pleased that the way is now cleared for us to create a truly global airline,” he said.

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