ACCC doubts over Virgin, Tiger deal
The competition regulator has invited further submissions on Virgin Australia's proposed acquisition of a 60% stake in Tiger, as it raised concerns the deal could mute competition in the domestic market.
The Australian Competition and Consumer Commission today released a Statement of Issues regarding the deal which sets out its preliminary views and seeks further information on the competition issues which have arisen in the course of its review to date.
"The ACCC's concerns relate to the risk of muted competition following the reduction of the number of airline groups within Australia from three to two (excluding regional airlines), and the loss of Tiger Australia as an independently owned discount competitor," ACCC chairman Rod Sims said.
"This potential reduction in competition arises as a result of the increased ability on the part of Qantas'Jetstar and Virgin Australia/Tiger Australia to coordinate their activities once Tiger Australia is no longer operating as an independently owned discount competitor."
Tiger Australia's financial position and the impact of the acquisition on the low cost carrier's size and strength could also affect the ACCC's final decision, it revealed.
"If the ACCC were to conclude that Tiger Australia would exit the market in the absence of the proposed acquiaition, this would be highly relevant to our assessment," Sims said.
In addition, plans to increase Tiger's fleet from 11 aircraft to 35 by 2018 under the terms of the proposed joint venture could also have an impact, with an increase in capacity likely to diminish "the prospect of any increase in coordinate conduct in the market", according to Sims.
As a result of the call for further submissions, the ACCC's final decision, scheduled for today, is now expected on March 14.
Virgin Australia responded to the release of the Statement of Issues, saying it is in the process of reviewing the document and preparing its response.
"Virgin Australia strongly believes the proposed acquisition will increase competition in the market to the benefit of consumers," the airline said.
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