Major airline shake-up to get green light, ACCC plans to approve Virgin-Qatar deal

A huge shake-up to Australian air travel has cleared a major hurdle, as the competition watchdog says it will approve a deal between two key players.

The competition and consumer watchdog is happy with a major partnership deal between Virgin Australia and Qatar Airlines that will shake up Australian travel to and from Europe, the Middle East and Africa.

On Tuesday, the Australian Competition and Consumer Commission announced it proposed to grant the two airlines permission “to engage in cooperative conduct under an integrated alliance for five years”.

Under the deal, Virgin Australia will lease Qatar Airways’ aircraft and crew for new routes – 28 new weekly return flights between Doha and Perth, Brisbane, Sydney and Melbourne.

The competition watchdog allowed the two airlines to start advertising and selling the new flights in November and since has ruled the partnership would be beneficial for consumers.

The airlines were allowed to start selling tickets as part of the deal from November. Picture: Supplied

“We consider that the proposed cooperative conduct would likely result in several public benefits, including providing enhanced products and services for air travellers that would include increased choice of international flights with additional connectivity, convenience and loyalty program benefits for consumers,” ACCC commissioner Anna Brakey said on Tuesday.

Virgin Australia only flies international routes to Indonesia, Fiji and Vanuatu since the airline went insolvent in the early days of the pandemic. US private investment firm Bain Capital brought Virgin Australia for $3.5bn only a few months later.

The Virgin-Qatar deal is subject to final regulatory approvals by the ACCC and other government bodies.

The ACCC will now ask for feedback on this draft determination before it makes a final decision.

Tuesday’s preliminary tick of approval means the new flights should begin from Sydney, Brisbane and Perth in June, and Melbourne from December.

Virgin Australia chief executive, Jayne Hrdlicka (centre) is expected to depart the airline once the Qatar deal is signed off. Picture: James D. Morgan / Getty Images for Virgin Australia

The ACCC is expected to release a final decision in March or April. After that decision, Treasurer Jim Chalmers and the Foreign Investment Review Board have the final say.

Qantas has a similar “wet lease” deal with Finnair for flights between Bangkok, Singapore and Sydney.

The Flight Attendants Association of Australia and Australian and International Pilots Association have said the use of Qatari labour on Virgin Australia flights would put downward pressure on wages at Qantas.

The ACCC has also been cautioned that the lack of time limits on the use of Qatar-based crew to operate the new services could have negative implications for the Australian aviation workforce.

However, the ACCC says these concerns are not prescient.

“We consider that Virgin Australia is unlikely to commence operating long-haul international services between Australia and the Middle East on a stand-alone basis in the next five years,” Ms Brakey said.

Virgin Australia ran out of money essentially as soon as international borders closed in 2020. Picture: NewsWire / Tertius Pickard

“In those circumstances, we do not consider that there is likely to be a material detrimental impact on the Australian aviation workforce as a result of the conduct.”

The Virgin Australia chief executive recently told NewsWire the deal would bring much-needed competition, especially flying to Europe.

“Competition is great for everyone. The more opportunities and choices consumers have the harder everyone has to work,” Jayne Hrdlicka said in November.

“It has taken a while post-Covid for everything to return to a balanced field for a lot of reasons. This is our opportunity to help improve the competitive dynamic.”

Flight Centre predicts a Virgin-Qatar deal will lower prices, particularly flights to Europe.

Flight numbers into Europe were still below pre-pandemic levels, Flight Centre corporate chief operations officer Melissa Elf said.

“The approval of the deal will support the recovery of our international visitor economy and strongly contribute to corporate travel recovery.

“It will not only make travel to the Middle East and Europe more affordable for our corporate travellers, but it will importantly see inbound benefits to Australian trade and tourism.”

Around the world, similar partnership deals and route expansions were consistently lowering prices for consumers, Ms Elf said.

“Not only will the approval of this deal impact international travel, but the wet lease arrangement should also free up aircraft to better service the domestic market,” she said.

“A strong and competitive airline industry is good for everyone, so we’re confident this will mean cheaper fares and more travel destinations for Australians from mid year.”