Virgin Australia (VAH) shares rose 1% to 46.5 cents yesterday after it was give interim approval from the ACCC to extend its alliance with Delta Air Lines on Australia-US air routes for a further five years.
The competition regulator’s provision approval was for half the length of time the two airlines had been initially asking for (optimists).
The Commission said yesterday it believed Virgin’s tie up with one of the US’s largest airlines was likely to result in public benefits that would outweigh the impact of any lessening of competition.
“The ACCC accepts that this combined network is likely to be valued by travellers between Australia and the US,” the regulator’s commissioner Jill Walker said in the announcement.
Virgin and Delta have a combined market share on air links between the two countries of 27%, while Qantas (QAN) has 55% and United Airlines 17%.
But on the high volume Sydney-Los Angeles route, the two airlines have a market share of around 35% between them.
VAH 1Y – Virgin Delta Deal Gets ACCC Greenlight
And while this worries the ACCC about an increased risk of higher fares, Dr Walker said the route had the greatest demand and the largest number of competitors.
The regulator also said it wanted to review market changes on the trans-Pacific routes earlier than the 10-year approval that Virgin and Delta had requested.
Virgin’s tie up with Delta is one of four alliances it has struck since 2009. But unlike those with Air New Zealand, Etihad and Singapore Airlines, Delta does not have a stake in Virgin.
The ACCC said submissions on the draft decision on the Delta tie close on June 26, after which the ACCC will make a final ruling.
Virgin flies daily to Los Angeles from both Sydney and Brisbane, while Delta has a daily flight between Sydney and LA (hence the alliance’s higher market share on this route).
