The Distillery: Air control

Scribes are divided on the ACCC's Virgin alliance decision, with one saying the airline should be fuming.

Much like airline food, airline tie-ups can be a divisive topic. So when the Australian Competition and Consumer Commission came down harder on Virgin Australia's trans-Tasman alliance with Air New Zealand than it did with Qantas Airways and Emirates, scribes were keen to have their say.

The Australian's John Durie argues Air New Zealand is right to claim foul over the ACCC's decision to limit the regulatory clearance of its Virgin Australia alliance for three years and to impose restrictions on certain cross-border leisure routes. 

"The draft decision released today is in stark contrast to earlier approval for the Qantas-Emirates trans-Tasman alliance, which runs for five years. There is no obvious reason why one alliance would or should last longer than the other. In round terms the Air New Zealand-Virgin alliance controls 57 per cent of the routes but key routes like Auckland to Sydney are dominated by Qantas with 51 per cent of the market against 38 per cent for Virgin and Air New Zealand."

However, The Australian Financial Review's Chanticleer columnist, Michael Smith, notes "the time-frame is typically three years so no-one should be overly disappointed."

"While the decision is a mixed result for Virgin, the important thing is it is allowed to maintain its alliance with Air New Zealand on the route. The Christchurch market has bounced back since the 2011 earthquake and Virgin has been opening up new routes such as Auckland to the Sunshine coast and increasing capacity between Perth and New Zealand."

Meanwhile, at Fairfax, Elizabeth Knight says New South Wales Premier Barry O'Farrell's decision to open up Sydney's casino market to competition from Crown goes against the wealth of opinion available from bodies like the National Competition Council and the Productivity Commission.

"Competition provides consumers with cheaper access to goods and services and improves availability. But there are certain goods or services that while legal are considered to contain adverse social and economic consequences and more competition could become a net disbenefit for the community. Gambling can fall into this category. Former Australian Competition and Consumer Commission head Graeme Samuel noted that 'when it comes to gambling, competition is not always a desirable process because competition raises incentives to undertake activities, such as attracting more people to use your product, which may not be consistent with public interest considerations'."

At Business Spectator, Stephen Bartholomeusz turns to the downbeat Westpac-Melbourne Institute index of consumer sentiment, which comes hard on the heels of a "disturbing" NAB survey of business conditions and the International Monetary Fund’s latest downward revision of the outlook for global growth. He thinks it will take a lot to turn attitudes around.

"One suspects ... it is going to take a combination of several rate cuts and a clear election outcome before there is any real prospect of a material improvement in business and consumer confidence and even then it would be dependent on domestic and international settings not deteriorating further."

Indeed, Fairfax's Michael Pascoe notes that while Kevin Rudd's resurrection has done wonders for Labor's polling, consumer sentiment is a tougher measure to move.

Pascoe's colleage Malcolm Maiden strikes a more optimistic tone, arguing Kohlberg Kravis Roberts' $6 billion capital raising for its latest Asia-Pacific investment fund "says something about this region's prospects that contradicts short-term angst about growth slowdowns."

Elsewhere, The Australian's Criterion columnist, Tim Boreham, wonders if Seek should be made redundant from portfolios after the ANZ Bank's discouraging job ads data yesterday.

And finally, the newspaper's markets columnist Karen Maley suggests we may still be stuck in the boom-bust cycle that has existed since the Asian financial crisis in 2007 – and that we're approaching another major rout.

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