On August 26, Etihad and Virgin Blue signed an agreement establishing a commercial partnership that, following approvals, will enable Virgin Blue’s international arm, V Australia, to launch direct services to Abu Dhabi in 2011 and the two airlines offer a joint network of more than 100 destinations from October 1, 2010.

The airlines have lodged an application for authorisation with the Australian Competition and Consumer Commission (ACCC) to allow them to cooperate across a broad range of commercial functions. It is only with this further cooperation that the airlines will be able to offer the full program of benefits to consumers the partnership will bring.

The proposed alliance is a win-win situation for the travelling public in Australia and around the world. In terms of increasing competition, choice and convenience for customers, this is undoubtedly the right way forward.
As outlined in the submission, the airlines seek interim authorisation for the alliance to ensure that the launch of V Australia’s new services to Abu Dhabi in February 2011 is successful. 

On September 9, Qantas made a submission to the ACCC expressing concerns about the partnership - despite the fact that Qantas has availed of interim approval for similar partnerships - and calling on the regulator to ignore calls by the airlines to grant interim authorisation. A number of media reports followed.

Etihad and Virgin Blue have responded via a further submission to the ACCC.

For the record:

• Qantas considers it would be more appropriate to consider the proposed alliance in totality, before the airlines begin any co-operation:

If Qantas’ position was adopted, it would simply delay an initiative that clearly increases competition and has huge benefits for passengers.

• Qantas has expressed concerns that the application by the two airlines makes no mention of pricing between Australia and Britain-Europe:

It is intended that under interim authorisation, the applicants would jointly set prices on connecting services via Abu Dhabi to Europe and the UK, and authorisation is being sought for joint marketing, distribution, sales and scheduling.

This is standard practice with such alliances. In fact, the cooperation outlined is similar to that under the authorised Qantas/British Airways Joint Services Agreement, which allows the airlines to coordinate on services between Australia and the UK/Europe and intermediate points such as Bangkok and Singapore.

• Qantas claims that the airlines have not expressed in any detail the specific activities to be undertaken and the scope of cooperation required to implement each of these stages:

The scope of the alliance is set out in the original submission and copies of the alliance agreements have been provided to the ACCC.

As a first step, Virgin Blue and Etihad have agreed, subject to authorisation, that Virgin Blue will commence three weekly V Australia flights between Sydney and Abu Dhabi from February 2011, effectively enabling the two airlines to offer customers a double-daily service. The airlines need to commence the marketing and sales of these services as soon as possible, to ensure they are successful.

In contrast to the detailed explanation provided in the submission to the ACCC, it should be noted that Qantas sought – and was granted – interim authorisation in 2006 for its alliance with Orangestar on the basis that: given airline planning and scheduling timeframes, this means co-operation between the Qantas Group and the Orangestar Group needs to commence immediately to ensure the relevant schedule is in place. No other explanation was provided.

• Qantas considers passengers will suffer considerable harm and inconvenience if tickets are booked on a new service during the interim period but final authorisation is ultimately denied:

Again, this was the same possibility with the Qantas-Orangestar application. The airlines have arrangements in place to ensure that in the event that V Australia does not operate the three proposed services from February 2011, passengers will be accommodated on other Etihad services.

In summary, Qantas’ claims have no merit. Etihad and Virgin Blue clearly intend to provide maximum benefit to travellers through this partnership by jointly providing a more competitive product.

We now await the outcome of the ACCC’s deliberations.

To read the complete Etihad and Virgin Blue submission, click here.