Virgin Australia Holdings Ltd and Air New Zealand Ltd's trans-Tasman alliance will continue to enjoy the backing of the Australian Competition and Consumer Commission, with the watchdog proposing to conditionally reauthorise the partnership.
In a statement, the ACCC said the alliance was likely to result in "in material public benefits by allowing the airlines to link Virgin Australia’s domestic Australian network and sales presence with Air New Zealand’s domestic New Zealand network and sales presence".
This would contribute to the formation of a second integrated Australasian network, the watchdog said.
"Combining the networks of the two airlines allows them to offer enhanced products and services, such as new frequencies and increased access to loyalty program benefits and lounges," ACCC commissioner Jill Walker said.
"This in turn is likely to promote competition on trans-Tasman routes."
Without the alliance, the watchdog ruled Virgin's trans-Tasman operations would be more limited than its key competitors, while Air New Zealand was likely to be at some competitive disadvantage to the Qantas-Jetstar/Emirates alliance due to its "weaker sales presence and more limited access to the domestic market in Australia".
The ACCC said it didn't believe the alliance would reduce competition on the majority of trans-Tasman routes, but did note there would be a possible affect on routes between Christchurch-Melbourne and Christchurch-Brisbane; Wellington-Brisbane; Queenstown-Brisbane; Auckland-Gold Coast; and Dunedin-Sydney, Dunedin-Melbourne and Dunedin-Brisbane.
To address the potential issues, the watchdog proposes to impose conditions which require Virgin and Air New Zealand to maintain capacity on these routes, as well as enforcing a requirement for the airlines to report key performance data to the ACCC.
"The ACCC notes that the weighing up of likely public benefit and detriment was finely balanced and it was only with the proposed conditions that the ACCC reached the preliminary view that the alliance is likely to result in a net public benefit, Dr Walker said.
Virgin welcomes ACCC proposal
In a statement to the Australian Securities Exchange, Virgin Australia said it welcomed the findings of the ACCC and would review the period of the proposed authorisation and conditions as soon as possible.
The group noted it had sought re-authorisation that was unconditional and for a period of five years.
The ACCC is expected to make its final determination following public comments on its draft determination," Virgin said.