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4 November, 2020

Virgin seeks approval for alliance with regional carrier… whose biggest shareholder is Qantas

Virgin Australia and Alliance Airlines have applied for authorisation to cooperate in relation to the provision of services on around 40 regional routes and two short-haul international routes.

Both airlines are seeking authorisation “in order to efficiently manage capacity and quickly respond to changes in demand due to the COVID-19 pandemic”, according to the Australian Competition & Consumer Commission (ACCC).

This includes sharing information, including in relation to costs, willingness to operate, capacity, utilisation, anticipated demand and pricing about the relevant routes (details on these routes can be found in the ACCC application document).

The proposed alliance between Virgin and Alliance would also see both agreeing on capacity, flight schedules, and aircraft type, including whether a carrier will suspend or continue operations, which carrier will operate the relevant routes and under what commercial arrangements (wet lease or codeshare, or a revenue-sharing model).

Virgin and Alliance would also put in place “temporary commercial arrangements that are most suitable for the relevant route, considering demand and risk profile in the exceptional current market conditions”, the ACCC said.

The cooperation between the two airlines, if authorised, could also see both enter “risk- and revenue-sharing mechanisms and agreements as to price”.

“The applicants have also requested interim authorisation to facilitate the immediate planning and coordination of services on the relevant routes prior to the ACCC’s final determination in relation to the substantive application for authorisation,” the competition watchdog noted.

The ACCC is accepting submissions on the interim authorisation request received by 10 November 2020 and on the substantive application for authorisation by 20 November 2020.

It will make a decision regarding interim authorisation of Virgin and Alliance’s proposal in the week commencing Monday 16 November, before a draft determination will be handed down in either January or February 2021.

The ACCC expects to announce its final determination on the proposed alliance in March next year.

The application comes as Virgin prepares to emerge from voluntary administration under new owner Bain Capital and a new CEO by the end of this month.

It also comes as the ACCC continues to investigate Qantas’ acquisition of a 19.9 per cent stake in Alliance last year, making it the regional airline’s single biggest shareholder.

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accc Alliance Airlines Australian Competition Consumer Commission international routes qantas regional routes virgin virgin australia