Tentative Go-Ahead Given For Virgin Australia’s International Codeshares

Virgin Atlantic

IATA/ICAO Code

VS/VIR

Airline Type

Full Service Carrier

Hub(s)

London Heathrow Airport

Year Founded

1984

CEO

Shai Weiss

Country

United Kingdom

The Australian Competition and Consumer Commission (ACCC) has indicated it will grant permission for Virgin Australia to enter into codeshare pricing arrangements with its international airline partners for five years. Brisbane-based Virgin Australia has various international airline partners it wants to codeshare with, including Singapore Airlines, United Airlines, and Qatar Airways.

No real problems with Virgin Australia’s proposed codeshare arrangements say the ACCC

A codeshare arrangement allows an airline to put its flight designator and flight number on a flight operated by another airline. Airline A sells tickets on Airline B’s flights, sending passengers on to and receiving passengers from those flights. Airline B does the same. The effect for airlines is three-fold; it broadens an airline’s network without having to put their own metal onto a route. A codeshare agreement should also generate extra passenger traffic and revenues.

In this case, partner airlines like United would be allowed to specify the fares for their flights which Virgin Australia would sell in Australia. This could raise a few ant-competition issues, including resale price maintenance, which is why the ACCC took a close interest in the application. But on Friday morning, the ACCC indicated it would grant Virgin Australia’s proposed codesharing deal permission to proceed.

“The ACCC’s preliminary assessment is that these arrangements are likely to result in more choice and greater convenience for consumers looking to book international trips that include connecting flights operated by Virgin Australia,” ACCC Deputy Chair Mick Keogh said.

“There will be no competitive overlap between the parties on any route under these proposed arrangements, and other airlines, including Qantas, will provide competition to Virgin Australia and its partners on those particular long-haul international routes.”

The ACCC has said it is likely to grant Virgin Australia’s application to codeshare with its international partner airlines. Photo: Getty Images

A tangled maze of airline relationships

Virgin Australia has long-standing ties with Singapore Airlines. Its relationship with United Airlines and Qatar Airways is newer. Virgin Australia recently ditched long-standing North American partner Delta Air Lines in favor of United. Virgin Australia’s fresh relationship with Qatar is even more surprising given Qatar Airways is a oneworld member, making Qantas a more natural fit than Virgin Australia. But Qantas is already firmly in bed with Qatar’s rival, Emirates. As Qatar Airways CEO Akbar Al Baker said at IATA in Doha recently, Virgin Australia wasn’t their first partner in Australia, but options were limited, and they’d have a decent go with what they’ve got.

Airline codeshares and alliances are like a tangled web of cousins, second cousins, and married in partners – you’ve got to live inside it to get your head around the intricacies of it all. Today’s announcement from the ACCC isn’t the last word on the Virgin Australia codeshares, even if it is highly indicative. They’ve set a late July deadline for final submissions before making a final decision.

Virgin Australia was not Akbar Al Baker’s preferred Australian airline partner, but his choices were limited. Photo: IATA

Qantas lukewarm on proposed Virgin Australia codeshares

So far, the ACCC has received ten submissions on the matter. While not shooting the application down, Qantas has said it has concerns and wants the ACCC to carefully consider the nuts and bolts of Virgin Australia’s proposed codeshare arrangements.

“The Commission would need to be clearly satisfied that the benefits and convenience claimed to arise from the proposed conduct would not be such to delay or prevent the restoration of Virgin Australia’s independent operations on any route,” Qantas argued in their submission, adding that “the Commission should interrogate Virgin Australia’s claims that arm’s length codeshares are not commercially viable.”

Simple Flying has approached Virgin Australia for their response to Friday’s draft determination.