FIVE-YEAR EXTENSION FOR VIRGIN AUSTRALIA AND SINGAPORE AIRLINES ALLIANCE
Written on the 26 September 2016
THE Virgin Australia (ASX: VAH) and Singapore Airlines alliance has been granted a five-year extension by the Australian Competition and Consumer Commission (ACCC).
The airlines applied for a 10-year extension in May this year, as the existing approval expired in December 2016 after being first granted in January 2012.
In its determination, the ACCC says that due to the rapidly evolving nature of the industry, it is appropriate to review the authorisation earlier than the requested 10 years.
It noted there was limited overlap between the two airlines on international routes - the Australia-Denpasar route is the only one where the two airlines have competing services.
However, Virgin flies direct to Bali, while Singapore Airlines has an indirect service to the same location, stopping in Singapore. Additionally, where both airlines provide indirect routes to international locations, there are rivals operating similar services.
Virgin Australia Group CEO, John Borghetti (pictured), says, "We welcome the ACCC's assessment that the alliance has and will continue to result in material public benefits through enhanced products and services and the promotion of competition in international air travel."
Since the alliance began in 2012, the two companies have introduced new services between Singapore, Cairns, Canberra and Darwin; have increased the frequency of routes between Australia and Singapore by 30 per cent and made a 12 per cent increase in capacity; and have added destinations in Asia, Europe and South Africa.
Virgin is trading down 1.25 per cent this morning, at $0.237 per share. Since the end of 2015, the company has dropped in value by more than 50 per cent.
Virgin Australia is 84 per cent owned by a consortium of six companies: Etihad Airways, Nanshan Group, Singapore Airlines, HNA Group, Virgin Group and Air New Zealand.