UPDATE: ACCC Authorizes Virgin Australia-Singapore Airlines Alliance
November 30 2011 - 7:05PM
Dow Jones News
Australia's competition regulator has given the go-ahead for an
alliance between Virgin Australia Ltd. (VBA.AU) and Singapore
Airlines Ltd. (C6L.SG) saying the tie-up is likely to increase
competition for international air passengers.
The deal, which will intensify pressure on rival Qantas Airways
Ltd. (QAN.AU) which is also seeking to expand its presence in Asia,
had already been given preliminary approval by the Australian
Competition and Consumer Commission in October.
The ACCC said the alliance, which will see the airlines
cooperate on joint pricing, scheduling, marketing, and sales for
flights between Australia and Singapore and on connecting domestic
and international routes, would "be attractive to both corporate
and government passengers."
"The ACCC considers that the alliance is likely to lead to
increased competition for international air passenger services,"
ACCC Chairman Rod Sims said in a statement.
Virgin is pushing to raise its appeal to higher-margin business
customers and strike agreements with other airlines. Starting last
month, it has run code-shares on flights between Australia and the
U.S. with Delta Air Lines Inc. (DAL).
In a presentation to the company's annual shareholder meeting
last week, Virgin predicted that its alliances, along with separate
deals with three other airlines, would lift its market share of
flights into and out of Australia to nearly 30% by July 2012,
putting it marginally ahead of the Qantas-backed OneWorld airline
alliance.
Qantas, which is seeking to establish a premium airline through
an Asian hub, had written to the ACCC stating that it didn't oppose
the alliance. The regulator noted that at present, Virgin and
Singapore compete on only a limited number of routes.
It also said that while Singapore Airlines has a 32.84%
shareholding in Tiger Airways Holdings Ltd. (J7X.SG), which
competes with Virgin on a number of Australian routes, the alliance
"is unlikely to lessen Tiger Airways Australia's incentive to
compete in the domestic market."
Virgin shares were up 5.9% at A$0.36 at 0020 GMT, against a 2.5%
rise for the broader market.
-By David Fickling, Dow Jones Newswires; +61 2 8272 4689;
david.fickling@dowjones.com
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