Etihad defends proposed alliance with Virgin Blue

Abu Dhabi: Etihad Airways said on Tuesday its proposed alliance with Virgin Blue would have "strong benefits for travellers" after Australia's largest carrier, Qantas, attempted to block the deal.

Qantas Airways contacted Australia's competition regulator following calls by Virgin Blue Holdings Limited to fast-track its alliance with the UAE's national carrier.

In a submission posted on the Australian Competition and Consumer Commission's website, Qantas said: "Since Abu Dhabi attracts only a small volume of point-to-point travel, the true value of the proposed alliance rests in access to international networks."

"It is not possible that the applicants will not also be coordinating prices between Australia and Europe when they are price fixing on the Australia-Abu Dhabi route," the airline said.

Virgin's V Australia subsidiary had agreed to enter into a code-sharing agreement with Etihad, which would involve frequent-flyer programmes as well as coordinated pricing and scheduling.

Strong benefits

A spokesperson for Etihad Airways said: "Our proposed alliance with Virgin Blue will increase competition and will have strong benefits for travellers — both in the UAE and Australia. We have submitted a response to the Australian Competition and Consumer Commission (ACCC) and we will await the outcome of the ACCC's deliberations."

The move by Qantas came as Virgin Blue was already reeling from unfavourable preliminary decisions made by the ACCC and the US Department of Transportation about alliances with Air New Zealand and Delta. Max Sukkhasantikul, a commercial aviation expert at the Frost and Sullivan consulting firm in London, said: "It is only natural for any airline to block any partnership that threatens its business, whether their arguments are sound or not.

"The partnership between Etihad and Virgin Blue would be beneficial to the Australian consumer market and is unlikely to be blocked by the regulators as the partnership, although of importance to both airlines, will not be a dominant, combined force on the lucrative market between Europe and Australia; rather it will offer consumers an alternative choice," Sukkhasantikul said.

"Qantas has always lobbied the Australian government to block Middle Eastern carriers from expanding in the Australian market as, in their view, these airlines receive subsidies from governments to sustain their business, which may not particularly be the case.

"It is understandable as to why the proposed partnership with Air New Zealand was blocked as it would mean the partnership would be controlling over half of the market between Australia and New Zealand.

"However, the proposed partnership with Delta would actually be of benefit to the consumers considering that Qantas is relatively dominant on the market between Australia and the United States."