The ACCC has issued a draft determination proposing to grant authorisation to Virgin Australia and Air New Zealand for proposed unilateral code sharing arrangements on trans-Tasman routes.
Virgin Australia and Air New Zealand are seeking authorisation for Virgin Australia to place its airline code on trans-Tasman routes operated by Air New Zealand, which are sold in Australia and originate in Australia (VA coded trans-Tasman services). The codeshare rights are provided on the condition that Air New Zealand specifies the fares at which Virgin Australia may market and resupply those itineraries.
Free sale codeshare agreements allow the marketing carrier (Virgin Australia) to sell an unlimited number of seats on the operating carriers services (Air New Zealand) providing that there is inventory available.
"This proposed code sharing arrangement has the potential to increase ticketing choices for Australians travelling to New Zealand, and provide Velocity frequent flyer program benefits and international lounge access for eligible Virgin Australia customers," ACCC Deputy Chair Mick Keogh said.
Virgin Australia and Air New Zealand will also be able to jointly provide businesses with discounts and other marketing offers for VA coded trans-Tasman services.
Currently Virgin Australia operates its own services on routes between Queenstown and Melbourne, Sydney and Brisbane. The proposed arrangements do not apply to these routes nor to any routes where Virgin Australia commences operating its own services in competition with Air New Zealand.
The ACCC notes concerns that the code sharing arrangements may result in increased demand for Air New Zealand trans-Tasman services and upward pressure on airfares.
"We consider it unlikely that any significant increase in passenger demand for trans-Tasman services due to this code sharing arrangement would raise airfares,' Mr Keogh said.
"On current information, we also consider that the code sharing arrangements do not materially reduce Virgin Australia's incentive to operate its own services on other trans-Tasman routes."
The ACCC has also granted interim authorisation to allow Virgin Australia and Air New Zealand to commence commercial planning for any marketing and selling of fares for VA coded trans-Tasman services.
"The interim authorisation excludes the direct or indirect marketing, provision of offers and sale of fares to all customers before the ACCC makes its final determination," Mr Keogh said.
The ACCC is seeking submissions in response to the draft determination by 8 May 2024, before making its final decision.
Further details about the application and how to make a submission are available on the ACCC's public register here.
Background
Virgin Australia currently operates Australian domestic and short-haul international flight services. The six international destinations to which Virgin Australia currently operates are: Queenstown, New Zealand; Tokyo (Haneda), Japan; Nadi, Fiji; Denpasar (Bali), Indonesia; Port Vila, Vanuatu; and Apia, Samoa. Virgin Australia currently has non-reciprocal codeshare arrangements with several partner airlines that operate long-haul international air passenger services to/from Australia.
These arrangements allow Virgin Australia to place its code on long haul international services operated by the partner airline. The partner airlines specify the fares at which Virgin Australia may market and resupply these services to customers in Australia. Virgin Australia's Partner Carriers currently include Qatar Airways, United Airlines, Singapore Airlines, Hawaiian Airlines, All Nippon Airline and Air Canada.
Air New Zealand is New Zealand's national flag carrier. In addition to its operations on the trans-Tasman, Air New Zealand currently operates services to several destinations in the Pacific, Asia and North America.
Air New Zealand is currently in an airline alliance with United Airlines, Cathay Pacific and Star Alliance involving 26 international airlines.
Note
ACCC authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act (CCA).
Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit from the conduct would be likely to outweigh any public detriment.
