The Australian Competition and Consumer Commission (ACCC) has refused permission to extend the charter alliance between Virgin Australia (VA, Brisbane International) and Alliance Airlines (QQ, Brisbane International), ending a six year old relationship that allowed them to co-ordinate and jointly tender for lucrative fly-in-fly-out (FIFO) contracts servicing mining and resource clients.
It is the second significant decision from the ACCC in as many months that has derailed plans made by Australia-based airlines. In April, the ACCC blocked Qantas (QF, Sydney Kingsford Smith) from acquiring a 100% stake in Alliance Airlines. In their announcement quashing the Virgin Australia - Alliance Airlines arrangement, the ACCC said the arrangement had not delivered the public benefits promised when first allowed in 2017.
“This application involves the second and third largest providers of FIFO services jointly tendering and coordinating services. The airlines have not demonstrated to us that there’s sufficient public benefit to outweigh the likely detriment from their proposed coordination, so we have decided not to re-authorise the conduct,” said ACCC Chairwoman Gina Cass-Gottlieb. “We’re concerned that continuing the charter alliance is likely to reduce the number of bidders in tender processes for charter services, particularly when there would only be one other large provider of these services, and so the potential incentives to reduce service levels or raise prices for FIFO charter services would remain.”
Qantas and its subsidiaries are the largest operators in the FIFO segment. Virgin Australia primarily operates scheduled passenger flights in Australia and some short haul international services. However, its subsidiary, Virgin Australia Regional (VA, Perth International), has a standalone fleet and a substantial business servicing the FIFO market. It can also tap into Virgin Australia's network and fleet if needed. While operating some scheduled passenger services, Alliance Airlines is primarily a charter operator and a major player in the FIFO sector. Separately, it also wet-leases aircraft to Qantas and Virgin Australia for passenger operations.
A Virgin Australia spokesperson told ch-aviation that the airline was "disappointed" by the ACCC's decision. "The charter alliance has been operating successfully since 2017 and has provided an enhanced service to FIFO customers in Western Australia and on the East Coast," the spokesperson said. "Virgin Australia is committed to continuing to service its charter customers and we are working through the implications of this decision."
