Step Forward for United-Virgin Australia Partnership

Interim approval has been given for the codeshare agreement, which replaces Virgin Australia’s long-standing relationship with Delta Air Lines.

Credit: Rob Finlayson

Australia’s competition regulator has granted interim approval for United Airlines’ planned codeshare partnership with Virgin Australia.

The carriers announced in December proposals for a new codeshare pact, as well as cooperation on their loyalty programs and airport lounge access. The agreement replaces a Virgin Australia-Delta Air Lines alliance that has existed for more than a decade and included a joint venture (JV) for transpacific flying.

The United partnership will more than triple the number of US destinations available to Virgin Australia passengers, the Australian airline said. Customers will have one-stop access to 92 US destinations via United.

The Chicago-based airline added it would enhance its Australian network through access to Virgin Australia’s domestic network, specifically citing new access for United passengers to Adelaide (ADL), Brisbane (BNE) and Perth (PER). 

The Australia Competition & Consumer Commission (ACCC) said its interim authorization allows United to set the fares at which Virgin Australia may sell the services operated by United, whether those flights are sold as a standalone itinerary or as part of an itinerary that includes flight segments operated by Virgin Australia.

“The ACCC’s preliminary view is that this proposed codeshare arrangement with United Airlines is likely to result in a public benefit as it will help Virgin Australia re-establish its international network,” ACCC commissioner Stephen Ridgeway said.

“Currently, it appears that Virgin Australia is unlikely to be able to operate its own long-haul international services in the short term.”

Ridgeway added that the partnership is not likely to lessen competition as there is no operational overlap on any routes between Virgin Australia and United and there are other airlines operating on the routes.

United currently operates daily flights on the Los Angeles (LAX)-Sydney (SYD) and San Francisco (SFO)-Sydney routes and plans to recommence service between San Francisco and Melbourne (MEL) in June.

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Having granted interim approval, the ACCC is seeking feedback on the application for authorization, which covers Virgin Australia’s proposed codeshare pricing arrangements with other partner carriers.

Unlike in a traditional arm’s length codeshare pricing model, it is proposed that Virgin Australia’s partner carriers operating international services covered by the codeshare agreement will specify the fares at which Virgin Australia may market and resupply those services under a VA code.

Virgin Australia said this model would enable the partner to “respond to changes in market fares more efficiently and offer Australian travelers a competitive airfare, which is then replicated by Virgin Australia, regardless of whether they have booked on a VA code or the partner carrier code.”

At the same time, Virgin Australia said it can recover its costs and may make a return on marketing these services.

Earlier this week, Virgin Australia and Qatar Airways announced a new codeshare partnership. Under the agreement, Qatar Airways’ passengers will be able to connect to 35 points on Virgin Australia’s domestic network, including destinations such as Alice Springs, Broome, Cairns and Gold Coast.

Qatar Airways’ passengers will also have access to Virgin Australia’s recently relaunched short-haul international markets, including Fiji and Queenstown, New Zealand. Similarly, Virgin Australia customers will be able to access the Gulf carrier’s route network of more than 140 worldwide destinations.