ANZ-Virgin Blue alliance clears last hurdle

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New Zealand has approved the proposed trans-Tasman alliance between Air New Zealand (ANZ) and Virgin Blue, clearing the alliance's last regulatory hurdle.

"More sustainable competition, cost savings, and the commitment both airlines have made to maintain trans-Tasman passenger numbers will be major benefits of the alliance," says New Zealand Transport Minister Steven Joyce. "Travelers will benefit from a wider range of travel options and improved range of departure times, and the continuation of competitive fares."

Air New Zealand and Virgin Blue, which operates Pacific Blue Airlines, have agreed on minimum seat numbers to be operated across the Tasman Sea, which separates New Zealand and Australia, says New Zealand's Ministry of Transport.

On 16 December Australia's consumer watchdog, the Australian Competition and Consumer Commission (ACCC), granted the carriers "conditional authorization" for three years, though the carriers had sought five years.

Australia was originally opposed to the deal. The ACCC rejected the alliances as recently as 10 September, saying an alliance is not "more competitive" then Virgin Blue and Air New Zealand operating independently. The carriers appealed this decision.

Following its initial rejection of the deal, the ACCC said it received a "substantial amount of information from the applicants and interested parties about the likely public benefits and detriments".

"The ACCC is now satisfied that the identified public benefits, in combination with the conditions of authorisation, are likely to be sufficient to outweigh any public detriment arising from the alliance," it said.

Its conditional approval requires the airlines to maintain and grow the number of seats flown on the routes where the ACCC has identified competition issues. The aim is to restrict the alliance's ability raise fares by limiting capacity.

ANZ and Virgin Blue, the Tasman's largest and third-largest carriers, would have a combined 56% market share with the alliance, said the ACCC in September. Qantas Airways and its low-cost subsidiary Jetstar Airways would have 32%.