It’s been a big morning in airline competition in Australia.

The ACCC backtracked on its earlier opposition to Virgin Blue enjoying the same sort of price-fixing deals that Qantas has with carriers such as British Airways by conditionally approving its long-delayed proposal for a trans-Tasman alliance with Air New Zealand and by announcing provisional approval of its intended alliance with Etihad for flights to Abu Dhabi and beyond to Europe.

The deal with Air NZ, which is strictly limited to flights between Australia and New Zealand, and not beyond, will be reviewed after three years.

The Etihad deal, if final approval is granted, will give Virgin Blue’s V Australia long-haul division a potentially huge opportunity to compete with the Qantas/British Airways alliance by using Abu Dhabi as a much faster hub than London for connections throughout Europe.

At almost precisely the moment that the ACCC reversed its earlier negative stances on these proposed alliances this morning, Jetstar began flying an Australian-registered wide-bodied A330 between its base in Singapore and Melbourne.

The service is the critical first step in Qantas shifting assets and jobs overseas to evade the provisions of the Qantas Sale Act, which predated the rise of the Qantas-controlled Jetstar trans-border, low-cost franchise, which is now the fastest growing part of its business.

The Jetstar A330, which flew into Melbourne today, is an Australian-owned and registered jet crewed by pilots and cabin attendants based in Singapore on Singaporean pay and conditions.

Qantas says this strategy is essential if the airline is to regain its ability to compete with foreign carriers.  It envisages basing a substantial fleet of wide-bodied long-haul jets in Singapore in Jetstar colours in the near future to operate Singapore-Australia flights and Singapore-Europe flights to routes such as Rome, Amsterdam and Manchester, which Qantas has previously abandoned as uneconomic.

However, the Virgin Blue/Etihad deal, once the formalities are completed, will see full service V Australia jets fly non-stop to Abu Dhabi to connect to full service Etihad jets to dozens of European and UK cities well before Qantas can bring its much delayed Boeing 787s in the high-density Jetstar configuration.

Today’s ACCC announcements compel Virgin Blue and Air New Zealand to increase services and thus put further downward pressure on fares across the Tasman.

Peter Fray

Get your first 12 weeks of Crikey for $12.

Without subscribers, Crikey can’t do what it does. Fortunately, our support base is growing.

Every day, Crikey aims to bring new and challenging insights into politics, business, national affairs, media and society. We lift up the rocks that other news media largely ignore. Without your support, more of those rocks – and the secrets beneath them — will remain lodged in the dirt.

Join today and get your first 12 weeks of Crikey for just $12.

 

Peter Fray
Editor-in-chief of Crikey

JOIN NOW