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Virgin Australia flags competition concerns on Tasman market

Virgin Australia has had talks with Australia’s competition regulator over its concerns on the level of competition on routes between Australia and New Zealand.

Speaking during the airline’s earnings call, chief executive John Borghetti confirmed that it has been in talks with the Australian Competition and Consumer Commission on the market, but could not go into specific details of those talks.

“I think what is probably appropriate for me to say is that the dynamics across the Tasman are really complicated,” he says. “As a consequence there are…I believe complications from a competitive standpoint and we are talking with the ACCC about that, and it would be inappropriate for me to comment any further.”

In late October 2018 Air New Zealand terminated a long-term joint venture with Virgin covering the transtasman market, and instead entered into a codeshare agreement with Qantas to provide feed across the latter’s domestic Australian network.

Qantas also added its code to a number of Air NZ services in New Zealand, complementing the operations of its budget unit Jetstar in that market.

Unlike the Air NZ-Virgin joint venture, the Qantas codeshare agreement does not extend to transtasman routes, nor is there any form of revenue sharing.

That arrangement came under fire when it was announced in June 2018, with the Australian Airports Association concerned that it would further entrench Qantas’s dominant position in the domestic market.

At that time, the ACCC and the New Zealand Commerce Commission declined to investigate the codeshare agreement, and make it harder for Virgin to compete on the Tasman.

Borghetti admitted that Virgin’s transtasman loads fell during November, as it back-filled capacity that was previously operated by Air NZ.

That saw it launch three new routes – Newcastle-Auckland, Melbourne-Queenstown and Sydney-Wellington – and increase frequencies from major Australian cities to Auckland and Christchurch.

FlightGlobal schedules data shows that for February 2019, Virgin is scheduled to operate 18% of all seats on transtasman routes, putting it in third place behind Air New Zealand (37%) and Qantas (25%).

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