VA ACCC ‘condition’ risk

LAWYERS for Virgin Australia and its proposed Australia-China air alliance partners HNA Group, Hong Kong Airlines & HK Express have objected to the competition regulator’s plan to impose a “non- exclusivity condition” relating to interline and/or codeshare pacts.

In a submission filed by Gilbert & Tobin with the ACCC relating to its Draft Determination of VA’s Alliance Framework Agreement (AFA) with the China-based carriers, Virgin said the proposed condition is “unnecessary”.

They argued that Virgin’s AFA doesn’t prevent any of the alliance airlines from entering into interline deals with other carriers, or VA from signing other codeshare arrangements relating to Australian domestic routes.

VA suggested the proposed condition was “extremely broad” and would limit the alliances’ members from arranging other interline or codeshare tie-ups.

The condition was raised by the ACCC in response to a submission from Air China, which has an existing interline deal with VA on domestic flights ( TD 22 Mar).

“This is quite a narrow issue,” the lawyers stated, while noting Air China didn’t raise similar concerns about the Qantas and China Eastern Airlines alliance.

Gilbert & Tobin said Qantas had existing codeshare arrangements with China Southern and Cathay Pacific, pacts that are not affected by its alliance with China Eastern.

“The applicants submit that there is no unique characteristic or market circumstances in relation to the proposed alliance that would justify the imposition of the proposed condition”, the lawyers stressed.

“A broad condition of the type proposed could undermine the ability of the applicants to align their commercial interests, which would put the benefits promised by the Alliance (and recognised in the Draft Determination) at risk,” Gilbert & Tobin added.