Virgin, Tiger merger up in air
Mr Sims, the chairman of the Australian Competition and Consumer Commission, said the deal stood in stark contrast to Qantas and Jetstar's request to work more closely with joint-venture airlines in Asia, to which the regulator gave a final clearance on Tuesday.
"[The Virgin deal] is a very complex matter, whereas Jetstar started out complex and got simple," he said.
On the eve of an expected green light for the Qantas-Emirates alliance, the competition regulator has allowed Qantas and its budget offshoot to co-ordinate with Jetstar's joint venture operations in Singapore, Vietnam, Japan and Hong Kong on passenger and cargo services for the next five years.
The regulator said the better co-ordination of services meant "little, if any, detriment" because the airlines faced stiff competition from other carriers on the mostly intra-Asian routes they flew.
With Qantas about to step up its focus on Asia, the regulatory clearance will allow it to better co-ordinate flights with connecting services in Asia by Jetstar affiliates.
Qantas' alliance with Emirates focuses mainly on Europe via Dubai in the Middle East.
The expected final clearance on Wednesday for the Qantas-Emirates alliance, due to begin on Sunday, leaves Virgin's bid for a controlling stake in Tiger as the last big aviation deal still before the commission.
Mr Sims expected the watchdog's decision on the Virgin deal to take a month because of the need for it to assess crucial information from Australia's second-largest airline.
The regulator had been due to hand down a decision on March 14 but postponed it after requesting more details from Virgin.
Mr Sims declined to respond to Virgin chief executive John Borghetti's recent threat to walk away from the deal if the regulator forced it to commit to increasing Tiger's fleet.
Mr Borghetti said Tiger's fleet could triple to 35 planes within five years, but insisted he could not promise to live up to such growth because of the volatile nature of the industry.
"It is up to John Borghetti to put views that they want to put," Mr Sims said. While the deal would help Tiger compete with Jetstar, Mr Sims remained concerned it would leave Australia dominated by two airline groups in Virgin-Tiger and Qantas-Jetstar.
Frequently Asked Questions about this Article…
The deal involves Virgin Australia seeking a controlling stake in Tiger Australia. ACCC chair Rod Sims described it as "very complex" because the regulator needs to assess detailed information about how the transaction would work and its effects on competition, making the approval process more complicated than other airline deals.
The ACCC is reviewing the proposed Virgin takeover of Tiger and has requested additional details from Virgin. Chair Rod Sims said the commission remains undecided and expects its decision to take about a month as it assesses crucial information from Virgin Australia.
The ACCC gave final clearance for Qantas and Jetstar to coordinate with their Asian joint-venture airlines on passenger and cargo services for five years, finding little detriment due to strong competition on intra-Asian routes. By contrast, the Virgin-Tiger deal is still under scrutiny and considered more complex by the regulator.
The regulatory clearance covered coordination with Jetstar's joint-venture operations in Singapore, Vietnam, Japan and Hong Kong for both passenger and cargo services, mainly on intra-Asian routes.
Rod Sims indicated the watchdog's decision on the Virgin-Tiger deal would likely take about a month. The commission had postponed a planned decision from March 14 after requesting more information from Virgin.
John Borghetti said Tiger's fleet could potentially triple to 35 planes within five years but also warned he could not promise that growth because of the volatile nature of the airline industry. He also reportedly threatened to walk away from the deal if the regulator forced firm commitments on fleet increases.
ACCC chair Rod Sims expressed concern the deal could leave Australia dominated by two airline groups—Virgin-Tiger and Qantas-Jetstar—which could reduce competition. The regulator is weighing these competition risks as part of its review.
Investors should watch for the ACCC's forthcoming decision (expected to take about a month), any additional information requests or conditions from the regulator, and comments from Virgin management about fleet plans. These developments will influence competition dynamics between the major airline groups and could affect investor sentiment in the sector.
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