The Australian Competition and Consumer Commission (ACCC) has indicated it will withdraw permission for Virgin Australia (VA, Brisbane International) and Alliance Airlines (QQ, Brisbane International) to continue operating a charter alliance agreement that facilitated cooperating, coordinating, and jointly bidding for fly-in-fly-out (FIFO) work.
In 2017, the competition regulator okayed the agreement but following a May 2022 application by the airlines to extend it, the ACCC has now issued a draft determination and opposes the agreement continuing.
"The ACCC is not satisfied that the public benefits likely to result from the charter alliance agreement in the next five years will outweigh the public detriment that is likely to result from Virgin Australia Regional (VARA) and Alliance Airlines coordinating their FIFO services,” ACCC Deputy Chair Mick Keogh said. "The ACCC is not satisfied that the public benefits claimed to arise from combining Virgin Australia’s charter fleet and national regular passenger network with Alliance Airlines’ national charter network are likely to result from the extension of the agreement to the extent claimed by the applicants."
VARA is the Perth International based subsidiary of Virgin Australia and primarily operates contracted charter flights in Western Australia for customers in the mining and resources sector. Brisbane-based Alliance Airlines also has a substantial presence in the Western Australia FIFO market and a large base in Perth. Other FIFO competitors out of Perth include Qantas and its National Jet Systems subsidiary, Skippers Aviation, and Rex - Regional Express owned National Jet Express (NJE).
In their responses to the draft decision, a Virgin Australia spokesperson said the charter alliance agreement will continue to operate under an interim authorisation while Alliance Airlines' managing director, Scott McMillan, added that the charter alliance agreement is separate from an existing wet-lease agreement the airline has with Virgin Australia to operate some passenger flights on Australia's east coast. Alliance Airlines is subject to a takeover bid by Qantas, however, that bid also needs separate ACCC approval to proceed.
The ACCC has acknowledged that the existing charter alliance agreement provides some operational efficiencies such as integrating equipment and fleets as well as providing some customer benefits.
"It is unclear whether the likely benefits are sufficiently significant to outweigh the anti-competitive detriment, and whether they will be substantially passed through to or realised by customers," said Keogh. The ACCC has previously also acknowledged the bargaining power and sophistication of FIFO customers, who include some of the world's biggest miners and resource entities.
The ACCC is now seeking further submissions, including from Virgin Australia and Alliance Airlines, addressing their concerns. “We will continue to work closely with the ACCC and Alliance to provide further information to address the gaps identified by the regulator," the Virgin Australia spokesperson said.
The ACCC adds that the existing interim authorisation to continue operating the charter alliance agreement remains in place until a final decision is made sometime in November.
