ACCC Okays Air NZ-Virgin Blue Alliance

Australian regulators have approved an alliance between Air New Zealand and Australia’s Virgin Blue Group on routes between the two nations, in a rare reversal of an initial rejection.

The Australian Competition and Consumer Commission (ACCC) imposed conditions that it says are similar, but not identical, to additional commitments promised by the airlines. The carriers now await a ruling from New Zealand’s Ministry of Transport, which they expect in the next few days.

The ACCC issued its preliminary denial in September, but left the door open for the airlines to present new evidence. The two carriers subsequently offered additional guarantees to maintain and increase capacity in markets identified by the ACCC.

Even with these commitments, the ACCC says there is a narrow margin between public benefits and public detriments in this case. Because of this, it has opted for a shorter authorization period. It usually grants approval for five years, but has limited the Air NZ-Virgin Blue authorization until Dec. 31, 2013. This is the major point of difference between the airlines’ application and the ACCC ruling.

If there are no applications for review, the alliance may begin Jan. 7, the ACCC says. While this is too soon for the two carriers to launch their alliance, it should be operational sometime in the first quarter of 2011, an Air New Zealand spokesman says. The airlines intend to coordinate their approach to pricing, revenue management, capacity, schedules and routes.

The routes subject to capacity guarantees include flights between Wellington and Sydney, Brisbane and Melbourne, as well as Auckland-Brisbane, Dunedin-Brisbane, and Queenstown-Sydney services. On these routes the airlines must increase capacity in line with the rate of economic growth or the increase in passenger demand between the two countries. Irrespective of these indicators, current capacity must at least be maintained in these markets.

Meanwhile, the ACCC also issued a preliminary decision in favor of Virgin Blue’s alliance with Etihad Airways. This was widely expected, as the ACCC had already given interim approval for the alliance to begin, pending authorization.