Australia's competition watchdog has approved the tie-up between the air carriers, despite raising some concerns about the impact it will have on some routes.

The Australian Competition and Consumer Commission has ordered the airlines to gradually increase the capacity on six routes, which it says are the most susceptible to anti-competitive behaviour.

Gilbert + Tobin represented Virgin Blue and Air New Zealand in relation to the Australian competition aspects of the alliance. The alliance was granted conditional authorisation for three years by the ACCC yesterday, after months of lengthy submissions and negotiations.

Under the alliance, both airlines will coordinate prices, schedules and capacity on routes between Australia and New Zealand, resulting in a more efficient schedule, cost savings and an enhanced product for passengers, the carriers' lawyers said today.

The transaction involved detailed submissions and lengthy negotiations with stakeholders across the Tasman, Gilbert + Tobin said in a statement.

Following the ACCC’s September draft decision to deny authorisation, the airlines satisfied the ACCC that the public benefits associated with the alliance outweighed any anti-competitive detriment by providing further evidence and proposing novel authorisation conditions.

A number of New Zealand airports who had expressed opposition to the alliance also withdrew their opposition under the revised conditions. This is the first time that the ACCC has approved an airline alliance on the Tasman, following two previous attempts by Qantas and Air New Zealand.

VIEW ALL

Gilbert + Tobin competition partner Luke Woodward led the transaction, together with lawyers Louise Klamka and Rebecca Dollisson.

The Gilbert + Tobin team worked with Bell Gully partner Torrin Crowther and senior associate David Blacktop, who represented Virgin Blue and Air New Zealand in relation to the New Zealand competition aspects of the transaction.

The New Zealand Minister of Transport is expected to announce his decision in the coming days.

This decision comes at the same time as the ACCC announcement that it proposes to authorise Virgin Blue’s alliance with Etihad Airways for a period of five years. The ACCC has recognised that the alliance is likely to promote competition, resulting in benefits for Australian consumers through new international services and increased online connections.

Gilbert + Tobin also represented Virgin Blue on its proposed alliance with Delta Airlines. which obtained ACCC authorisation in December 2009 and is pending approval by US regulators.

“We are pleased to have assisted our clients with obtaining authorisation of the Tasman alliance which will enhance both Virgin Blue’s and Air New Zealand’s service offering on the Tasman," said Gilbert + Tobin partner Woodward.

"Virgin Blue’s strategic alliances with Air New Zealand, Etihad and Delta will together advance Virgin Blue’s competitive position, while benefiting passengers. We look forward to continuing to assist Virgin Blue expand its network to help it create a truly global Australian airline," he said.

Gilbert + Tobin has been the regulatory and competition advisors to Virgin Blue, Australia’s second largest airline, since their inception in 2000