Virgin Blue - Air New Zealand alliance wins approval

Virgin Blue 737-76N (32734/1090) VH-VBM "Tassie Tigress" departs Perth (per/VPPH).

(Photo by Robbie Shaw)

Qantas’s market stranglehold in Australia is set for the most dramatic shakeup since the demise of Ansett in 2001 after the Australian competition regulator gave approval for Virgin Blue’s comprehensive alliance with Air New Zealand, reversing a draft decision rejecting the partnership and a draft tick for its tie-up with Etihad Airways. The two alliances underpin Blue makeover set to be unveiled next month.

Australian Consumer and Competition Commission Chairman Graeme Samuel said that the regulator was satisfied that the alliances will “likely 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.”

Virgin Blue Group of Airlines CEO and MD John Borghetti, welcomed the separate decisions saying they were “truly game changing,” adding, “We are extremely pleased that the way is now cleared for us to create a truly global airline that not only offers a great product and service but also greater frequencies and great value for money fares.”

Starting in January, Blue will roll out a series of innovations that will reshape the airline with business class, new branding, larger aircraft, colour scheme, uniforms and onboard offering intended to reshape and reposition the airline.

The alliance with ANZ, which was initially rejected by ACCC, involves a coordinated approach to a range of issues including pricing, revenue management, schedules, capacity and routes flown.

However, Samuel warned that ACCC is still worried that the alliance may negatively affect competition on a number of routes between Australia and New Zealand. To counter this, it "imposed a number of conditions on authorization which are designed to address these competition concerns."

The Virgin Blue/Etihad alliance involves joint pricing and scheduling of services across networks and also an addition of capacity between Australia and Abu Dhabi. ACCC said it "considers that the [Etihad] Alliance is likely to promote competition and result in benefits for Australian consumers through new international services and increased online connections," Samuels said.

“The Etihad partnership will see us establishing an international hub in Abu Dhabi. This will allow us to offer corporate and leisure travelers a very attractive one-stop alternative to more than 14 destinations in Europe, plus the Middle East and Africa," Borghetti said. V Australia, VB’s long-haul airline, will commence direct services from Sydney to Abu Dhabi three times per week in February 2011 and three Brisbane-Abu Dhabi services per week by February 2012.

VB is awaiting a final determination from US regulators on its proposed alliance with Delta Air Lines. DOT tentatively disapproved the deal; however, the Australian government is now lobbying for approval on VB’s behalf. The ACCC has approved that tie up.

(Geoffrey Thomas - ATWOnline News)