The Australian Competition and Consumer Commission (ACCC) has approved the extension of the trans-Tasman alliance between Air New Zealand and Virgin Australia for another five years.
"The ACCC considers that without the alliance, Virgin Australia's trans-Tasman operations would be more limited than its key competitors," says ACCC commissioner Dr Jill Walker. "It also considers that Air New Zealand is likely to be at some competitive disadvantage to the Qantas-Jetstar/Emirates alliance due to its weaker sales presence and more limited access to the domestic market in Australia."
Virgin and Air New Zealand first received authorisation for their alliance in December 2010, and applied earlier this year to extend it for a further five years and remove certain capacity conditions placed on them.
The extension to 31 October 2018 is longer than the three years that the ACCC proposed in an interim determination released in July.
As a condition of the reauthorisation, the two carriers will be required to maintain a base level of capacity on six routes that the ACCC believes the alliance may affect competition. The routes are Christchurch-Melbourne and Christchurch-Brisbane; Wellington-Brisbane; Queenstown-Brisbane; Auckland-Gold Coast; and Dunedin-Brisbane.
The ACCC adds that it will hold reviews on the appropriate level of capacity on those routes over the next two years, with the first review to commence in September 2015.
Air New Zealand's chief strategy, networks and alliances officer Stephen Jones welcomed the announcement, noting that it would: "enable the airlines to continue to improve the customer journey across the Tasman.
"It will also enable the airlines to continue to leverage efficiencies, opportunities and cost savings on Tasman operations."
The carrier adds that alliance is still subject to approval from New Zealand's Ministry of Transport.