The Australian Competition and Consumer Commission (ACCC) has approved an application by Virgin Australia and Virgin Atlantic to cooperate on services between Australia and the UK and Ireland.
The airlines, which are separate businesses whose services do not currently overlap, already have a codeshare arrangement but will now be able to work together on services via mutual mid-points in Hong Kong and Los Angeles, as well as any future mutual connection points.
The authorisation will allow the two airlines to coordinate on a wide range of matters, such as jointly managing prices, inventory, and marketing strategies. These are not currently permitted in their existing arm’s length commercial codeshare and loyalty arrangements.
"The arrangements which have been authorised will not lessen competition on any route, and are likely to provide public benefits, including through improved scheduling and enhanced loyalty program benefits," ACCC commissioner Stephen Ridgeway said.
Virgin Australia expects that the cooperation will increase its passenger numbers, making its Hong Kong service more sustainable.
The ACCC’s final decision said the agreement is likely to lead to lower prices and increased traffic feed.
“Through joint management of inventory, the applicants will openly discuss demand for their services and opportunities for discount connecting fares to stimulate demand,” it added.
“Coordination of inventory strategies, together with more favourable prorates, will result in more competitively priced codeshare seats for customers and increased load factors for the applicants, improving the sustainability of their services and inviting a pro-competitive response from competitors.”
Virgin Australia and Virgin Atlantic said the cooperation would be “fundamentally pro-competitive” as it would drive passenger feed and assist Virgin Australia to more sustainably operate its Australia - Hong Kong services in competition with Qantas and Cathay Pacific
Virgin Australia launched services to Hong Kong from Melbourne in June 2017 and added a route from Sydney in July 2018.
In 2018, the UK was Australia’s fourth largest inbound market for visitor arrivals, according to Tourism Research Australia, with Australia welcoming 699,280 visitors.
Over the next eight years, the UK is anticipated to remain one of Australia’s top ten inbound markets and by 2020 it is expected that UK visitors to Australia will spend between $5.5bn and $6.7bn, up from about $3.1bn in 2018.
The ACCC has authorised the cooperation agreement until 30 November 2024.
Image: Virgin Australia