Virgin-Air NZ alliance threatened
- Latest News
- Monday, 13 September 2010
"The ACCC considers that the alliance is likely to reduce competition in the market for trans-Tasman air passenger services," ACCC chairman Graeme Samuel said.
The ACCC believes that Virgin Blue is a significant competitor to Air New Zealand and there are a number of trans-Tasman routes where the alliance raises competition concerns. These routes account for around one quarter of passenger traffic in the trans-Tasman market. This means that more than one million passengers per year may be adversely affected by the removal of competition between Virgin Blue and Air New Zealand.
The ACCC is also concerned that the alliance is likely to increase the likelihood of co-ordinated conduct on trans-Tasman services, taking into account the resulting increase in concentration and removal of the constraint posed by Pacific Blue.
The ACCC accepts that the alliance is likely to result in some of the public benefits claimed by the applicants, such as cost savings and efficiencies. However, the ACCC has doubts about the magnitude of these benefits.
The applicants argue that the alliance will enable them to compete more effectively against the Qantas-Jetstar group. The ACCC acknowledges that the Alliance would provide the applicants with a broader and more integrated network. However, the ACCC is not convinced that this necessarily creates a dynamic in the trans-Tasman market that is fundamentally more competitive than a scenario where Virgin Blue and Air New Zealand continue to operate independently and pursue their publicly stated aims to develop their business models.
The ACCC has invited the applicants to provide further information to substantiate the public benefits claimed and to support the claim that the Alliance is more likely to promote than lessen competition in the trans-Tasman market.
Virgin Blue and Air New Zealand say they are currently reviewing the draft decision and expect to respond to the ACCC’s concerns over the coming weeks.
