Virgin Australia and Alliance get green light on partnership

Australia’s competition watchdog has reversed a draft decision that would have prevented Virgin Australia Regional Airlines and Queensland-based Alliance Aviation Services establishing a charter alliance. The alliance will allow the companies to jointly bid against archrival Qantas and Cobham Aviation Services for corporate fly-in fly-out (FIFO) services used by resources companies. The two operators also plan to cooperate on various aspects of their FIFO operations such as aircraft maintenance, airport handling, check-in, frequent flyer programs, lounge access, scheduling, pricing, and sales and marketing. The Australian Competition and Consumer Commission said the only significant operational overlap between Virgin and Alliance was in Western Australia and it now believed the public benefits outweighed any detriment arising from the loss of competition. “The Charter Alliance is likely to realise significant public benefits such as efficiencies from integrating VARA and Alliance Airlines’ Perth operating bases, increased flexibility and optimal use of aircraft through combining their fleets, and enhanced product and service offerings through combining Virgin Australia’s national regular passenger network with Alliance Airlines’ national charter network,” ACCC Commissioner Roger Featherston said in a statement. The ACCC said concerns expressed in its draft determination about the alliance’s impact on competition had been addressed by further market inquiries. “The operational synergies which are likely to result from the Charter Alliance and bringing together VARA and Alliance Airlines’ complementary networks should reduce their costs and allow them to make more competitive offers to customers,” Featherston said. “Further, many of the larger FIFO customers are sophisticated and well-resourced companies with procurement expertise who have strong bargaining power in their negotiations with FIFO operators.” “These customers will continue to have viable alternatives, in particular Qantas and Cobham. Market conditions in Western Australia suggest that these airlines will continue to compete strongly with the Charter Alliance.’’ Virgin, which is cutting is fleet of regional ATR turboprops from 14 to six, also recently announced that a number of regional passenger routes in Queensland would be operated by Alliance.