Thursday, 25 April 2013

And then there were two...

On Tuesday 23 April 2013, the Australian Competition & Consumer Commission ("ACCC") announced that it would not block Virgin Australia's proposed takeover of Tiger Airways Australia. While it acknowledged that there were anti-competitive concerns about the takeover, it also noted that Tiger Airways (currently mainly owned by Singapore Airlines) had said that it would leave the Australian market and be most likely to redeploy its 11 aircraft used in its Australian operations into its Asian operations.

So effectively, the ACCC was left with a situation of damned if you do and damned if you don't. That is, by allowing the merger, Australia would effectively have 2 airline groups: Qantas and Jetstar on the one hand and Virgin Australia and Tiger Airways on the other. However, if it didn't allow it then we would still be left with 2 airline groups being Qantas and Jetstar on the one hand and Virgin Australia on the other.

I've read many articles in recent months about the end of low cost airfares (mainly in the context of fares to overseas destinations, particularly to Europe, which is something of a coming of age trip for many young 20 something Australians) with which I disagree - I've seen fares as low as $798 from Melbourne to Brussels return with 5 star, full-service, airline, Qatar Airways and $1077 from Sydney to Amsterdam return with full-service, but not 5 star, China Southern Airlines.

Oops, off I go on a tangent again!

There is a serious risk that we will no longer see the cheap airfares that we have been accustomed to seeing with Tiger Airways Australia under Virgin Australia (think $41 return Adelaide to Melbourne that I saw recently). While Virgin Australia has itself moved away from being a low-cost airline to one aiming to get a share of the business customers, one hopes that Tiger Airways Australia will remain a low-cost carrier so that Australia has another low-cost airline to keep Jetstar competitive.

A lot of people have lost faith in Tiger Airways Australia, particularly with its unfortunate temporary grounding a few years back. Perhaps, having the backing of Virgin Australia will help Tiger Airways Australia get itself back in favour with the general public and may actually help get more bums on seats.

Ultimately, time will tell.

Does anyone have any stories to tell about previous airline mergers?

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