Virgin Australia and Virgin Atlantic have been granted interim authorization by the Australian regulator to co-operate on flights to Ireland and the UK via Hong Kong, Los Angeles and “future connecting points”.
The two already have a codeshare agreement but the interim authorization allows them to coordinate on a wide range of matters such as jointly managing prices, inventory and marketing strategies.
This would not be permitted in their existing arm’s length commercial codeshare and loyalty arrangements.
The authorization provides statutory protection from court action that could otherwise arise from the closer partnership under competition law.
The Australian Competition and Consumer Commission said Virgin Australia and Virgin Atlantic do not currently operate flights on any of the relevant routes.
“We do not think this enhanced cooperation is likely to lessen competition on the routes between Australia and the British Isles,” ACCC Commissioner Sarah Court said.
The ACCC also found Virgin would suffer potential detriment if was delayed in its ability to increase passenger traffic, load factors and profitability on the routes.
Virgin Australia welcomed the decision.
“This is great news for customers who will be able to experience more competitive pricing on flights between Australia and the UK/Ireland via Hong Kong or LA and enhanced reciprocal frequent flyer arrangements, amongst other benefits.” a spokesman said.
“We’re looking forward to providing guests with a unique Virgin experience all the way to the UK/Ireland via Hong Kong or LA, with further details about the arrangement to be shared in the coming months.”
The Australian carrier has warned it only has 10 percent market share on the Hong Kong route and load factors have been about 66 percent, significantly below its competitors.
It has also lodged a submission with the International Air Services Commission calling for it to stand by its decision to reject an expanded codeshare agreement between Cathay Pacific and Qantas.
The IASC found the public benefits of the Qantas-Cathay proposal were “significantly outweighed” by the public detriment but Qantas has since called on the commission to reverse its decision.
The interim authorization for the two Virgins will remain in effect while the ACCC considers the application for authorization in more detail.
It expects to issue a draft determination, which will be open for public comment, by September with a final decision planned for November.
Submissions supporting the application were received from Air Mauritius, Tourism Australia and Qantas.