The Australian Consumer and Competition Commission (ACCC), has expressed concerns about Virgin Australia’s proposed acquisition of a 60% stake in Tiger Airways, as reducing the number of domestic airlines from three to two could be bad for competition.
SYDNEY- Virgin Australia announced recently its plans to buy the majority stake in Tiger’s Australian operations, however this would mean Virgin and Qantas would be the only major airlines operating in Australia.
The Australian Consumer and Competition Commission (ACCC) has first to approve all major takeovers to ensure they will not result in lack of competition, therefore affecting consumers, for example by pushing up prices.
“This potential reduction in competition arises as a result of the increased ability on the part of Qantas/Jetstar and Virgin Australia to co-ordinate their activities once Tiger is no longer operating as an independently owned discount competitor,” said ACCC chairman Rod Sims.
The ACCC is expecting to make a final decision by 14 March.
Some key factors the ACCC is considering in favour of the deal are whether Virgin would expand the number of planes Tiger flies, which would be good, and whether Tiger would survive at all without Virgin’s intervention.
In January, Tiger’s Singaporean parent company said the Australian business made an operating loss of S$12.9m (A$10m) for the quarter. There has been some speculation Tiger could pull the pin on its Australian subsidiary.
The ACCC has other options aside from blocking the takeover, such as imposing conditions on the companies to ensure they don’t behave in a way that reduces competition.
In a statement, Virgin said it “strongly believes the proposed acquisition will increase competition in the market to the benefit of Australian consumers”.
The acquisition of Tiger is part of a spate of acquisitions Virgin is trying to tie up, which could make it a serious competitor to market leader Qantas. Last week Virgin got approval to take over regional airline Skywest.
If the Tiger acquisition goes ahead, Virgin would be able to compete with Qantas on all fronts: low cost services, regional services and full services.
Major rival Qantas was previously given the go ahead by the ACCC for its alliance with Middle Eastern airline Emirates.
Qantas recently announced a new Asian strategy designed to boost its international operations, including stronger links with key hubs in Singapore and Hong Kong and more partnerships with airlines in the region.
(Source: Commonwealth Bank News Service)
Luc Citrinot a French national is a freelance journalist and consultant in tourism and air transport with over 20 years experience. Based in Paris and Bangkok, he works for various travel and air transport trade publications in Europe and Asia.
