The Australian watchdog has granted an extension to Virgin Aus and Delta Air Lines‘ partnership despite noting a potential risk to competition.
The Australian Competition and Consumer Commission is proposing to grant authorisation for a five-year extension – half of the requested 10-year reauthorisation period.
With approval, the two airlines would work together for a total of 11 years, with first approval received in December 2009.
As part of their partnership, Virgin and Delta have operated codeshare flights between Australia and the USA as well as codeshare services on their domestic networks.
The ACCC noted that the combined market share of Virgin and Delta on the key overlap route of Sydney to Los Angeles is around 35 percent.
However, ACCC Commissioner Dr Jill Walker said the watchdog believes the benefit of continued cooperation would outweigh the detriment of reduced competition.
“This combined market share increases the risk that some passengers may pay higher prices with the alliance, particularly on this direct overlap route. However, this is also the route with the greatest demand and the largest number of competitors.”
Dr Jill Walker, ACCC Commissioner
She continued saying the airline alliance has benefited the travelling public by offering easier access to flights beyond the US to Aus route.
The alliance was also recognised for including increased and better online connections, access to each others’ frequencies, better schedule spread, loyalty program benefits and improved lounge access.
“The ACCC accepts that this combined network is likely to be valued by travellers between Australia and the US, since the majority of such passengers connect from and/or to destinations behind and beyond the key gateway points.”
Dr Jill Walker, ACCC Commissioner
The ACCC is seeking submissions from interested parties in relation to its draft determination, before making a final decision.
Submissions are due by 26 June 2015.