Qantas grateful for watchdog's Xmas gift
The ACCC's decision to grant draft authorisation for 5 years to Qantas's alliance with Emirates is the best Christmas present that Qantas boss Alan Joyce could have hoped for.
ACCC boss Rod Sims says the alliance only produces "material though not substantial" benefits for consumers, and on that basis has imposed some caveats. The draft authorisation if confirmed will run for five years instead of 10 years as sought by Qantas and Emirates, and Sims has also imposed special conditions on the alliance's routes between Australia and New zealand.
The main part of the deal - an alliance covering operations into the northern hemisphere - has been given the green light. However, the ACCC decided competitive drawbacks associated with a tie-in by two competitors are offset by the continuing competition from other carriers on key routes, improved access to routes for consumers (it significantly increases the number of European destinations that Qantas offers, for example), and an expanded, unified frequent flyer programme.
The ACCC doesn't mention it, but from a customer's perspective, one of the key changes will be that the services the two airlines offer will be harmonised on a highest common denominator principle.
While Sims says the deal doesn't substantially change the lot of airline customers in this country, this is a very significant deal for Qantas as it tries to find a financially sustainable structure for its international routes, and it will be fascinating to see the response from competitors. There will be one, no doubt about that.
Singapore Airlines will be closely watched. It acquired a 10 per cent shareholding in Virgin Australia at the end of October, and is also negotiating the sale of its 49 per cent stake in Richard Branson's Virgin Atlantic operation to Delta of the US.
Branson's Virgin group in turn is 26 per cent shareholder in Virgin Australia, and Virgin also counts Etihad as a 10 per cent shareholder, and Air New Zealand as a 19.9 per cent shareholder.
Singapore Airlines chief executive Goh Choon Phong was recently reported as saying the 10 per cent stake in Virgin Australia was strategic and sufficient for the time being, but over time Singapore Airlines may look to go higher, and the Virgin group's 26 per cent stake might be the vehicle.
Confirmation that Joyce's deal with Emirates is on track can only intensify the speculation that Singapore Airlines will look to step up its involvement with Virgin Australia.