Virgin Atlantic and Virgin Australia are seeking to strengthen their ties through a long-term co-operation agreement on services between the UK/Ireland and Australia.
The airlines currently codeshare between Australia and the UK/Ireland through Los Angeles and Hong Kong and on Virgin Australia domestic services.
They are seeking authorization from the Australian Competition and Consumer Commission to deepen their relationship through the two hubs as well as any future mutual connection points.
Virgin Australia says it needs the agreement to support its Melbourne-Hong Kong and Sydney-Hong Kong services in its battle against the dominant airlines, oneworld partners Qantas and Cathay Pacific.
It recently won a victory on the market with a decision by the International Air Services Commission to reject a Qantas-Cathay codeshare proposal.
More generally, the Australian carrier says in the June 3 application that the strength and reach of its international network are critical to its ability to gain access to the higher yield corporate and premium leisure travel business in competition with Qantas.
The conduct for which authorization is sought includes joint pricing, inventory management, scheduling coordination, network planning and marketing.
The two also propose to cooperate in relation to product alignment, airport operations, joint procurement and tenders for corporate contracts.
This includes extending their existing codeshare and frequent flyer agreements.
The competition watchdog has called for submissions by June 21 on the airlines’ request for interim authorization with a draft determination planned for September this year and final ruling tentatively expected in November.
The two Virgins argue to the agreement will allow them to create more competitive connecting international services between Australia and the UK/Ireland, including a “compelling Virgin-to-Virgin brand proposition”.
“The Applicants will better utilize each carrier’s home market strength, implement improved pricing and inventory management strategies and optimize their airport operations in Hong Kong and Los Angeles,’’ they say in their application.
“The Applicants project that these service enhancements, together with loyalty and other product initiatives, will attract further passengers and better support existing and future services from Australia and the UK for Virgin Australia and Virgin Atlantic respectively.
“This is crucial to the sustainable operation of Virgin Australia’s services between Australia and Hong Kong.”
The two airlines have a combined market share of less 3 percent on the highly competitive Kangaroo Route compared to a 40 percent share held by the Qantas-Emirates alliance.
They operate complementary route systems and say their proposal will result in increased choice for passengers.
Benefits are expected to include more competitive pricing, product enhancements, improved schedules and “valuable improvements in reciprocal frequent flyer arrangements, lounge access and status recognition”.