Virgin Australia and Alliance Airlines have received the green light from the consumer watchdog to expand their partnership to cover 41 regional domestic routes and two short-range international routes.
This will pave the way for Virgin to re-establish a number of regional routes which it has suspended or withdrawn, including Sydney-Canberra, which is now flown by newcomer Rex alongside Qantas.
In its original application to the Australian Competition & Consumer Commission, Virgin noted its 176-seat Boeing 737s "are not appropriate or cost efficient to operate a number of the relevant routes."
Virgin also cited its shift under new owners Bain Capital "to an all-Boeing 737 mainline fleet" and the removal of its ATR turboprops as creating a hole in the airline's regional footprint.
In a statement issued in response to today's ACCC's decision, Virgin said the Alliance tie-up "will enable the redeployment of some of its Boeing 737 fleet to high-density routes across the airline’s domestic network."
Approving a two-year partnership through to March 31 2023, the ACCC said it was "likely to result in a public benefit by promoting competition on certain regional and short haul international routes."
"Virgin Australia and Alliance are proposing to coordinate their operations to enable them to better manage capacity and respond to changes in demand over the next two years as the aviation industry recovers from the COVID-19 pandemic."
Virgin and Alliance previously held a codeshare relationship on several routes from Brisbane.
However, Virgin says it "has no current plans to utilise Alliance Airlines on routes within Western Australia", where its own VARA regional arm is based.
Alliance runs flies with the foxes and hounds
Brisbane-based Alliance Airlines is 20% owned by Qantas, which has also inked an agreement to fly Alliance's Embraer E190 jets on selected regional routes.
The 'wet lease' agreement – under which Alliance will also crew the aircraft – will initially cover three of Alliance's E-jets, with scope to expand to a total of 14 depending on market conditions.
Qantas expects to schedule the Alliance E190s from June 2021 on routes such as Adelaide–Alice Springs, Darwin–Alice Springs and Darwin–Adelaide, as the first three E-jets will be based in Adelaide and Darwin.
The Qantas Boeing 737s which currently fly these routes will be relocated to other parts of the domestic Qantas network in what the airline describes as an ongoing ‘right aircraft, right route’ approach.
"The E190 is a perfect mid-size regional jet for routes like these ones in northern Australia," says QantasLink CEO John Gissing.
"It has longer range than our 717s and it’s about half the size of our 737s, which means the economics work well on longer flights between cities and towns outside of the top five population centres."
PREVIOUS [ November 2, 2020] | Virgin Australia plans to expand its partnership with Alliance Airlines as a way to continue serving regional markets as a more streamlined Virgin takes flight under new owners Bain Capital.
Some 40 regional routes have been earmarked in an application to the Australian Competition & Consumer Commission for increased cooperation between the two carriers, who already enjoy a codeshare relationship on several routes from Brisbane.
Almost half of the routes cited spear out from Brisbane and Cairns, including two short-range international legs to Port Moresby and Honiara.
Also listed in the ACCC proposal are:
- Sydney to Canberra, Albury, Ayers Rock, Coffs Harbour, Port Macquarie, Tamworth
- Melbourne to Canberra, Mildura and Newcastle
- Adelaide to Canberra, Alice Springs and Olympic Dam
- Perth to Boulder, Kalgoorlie, Karratha, Kununurra, Newman, Onslow and Port Hedland
In its pitch to the ACCC, Virgin cites its shift under Bain "to an all-Boeing 737 mainline fleet" and the removal of its ATR turboprops as potentially creating a hole in the airline's regional footprint.
The 176-seat Boeing 737s "are not appropriate or cost efficient to operate a number of the relevant routes," Virgin notes.
This includes runway limitations at some Queensland destinations such as Cloncurry, Emerald, Moranbah and Weipa.
In addition, "regional New South Wales routes between Sydney and Port Macquarie, Tamworth and Albury have insufficient demand to be viably serviced with a Boeing 737 aircraft."
"Post administration, Virgin Australia is very likely to cancel loss- making routes," the application flags
"Virgin Australia remains committed to servicing these routes in the future, even though it may be unable to operate them itself" – which is where Alliance stands to fill the gap.
Virgin says it has ruled out the Fokker F100s of its own WA-based regional arm as "for operational and network reasons could not be deployed on the east coast."
Alliance Airlines' fleet of Fokker 50s, 70s and 100s is considered as "right-sized" for the nominated routes, with the addition of 14 Embraer E190 jets – the same type which Virgin used to fly until 2018 – offering further scope once they take wing in the first quarter of 2021.
"The current view is that we have a need for around four E190s upfront," Alliance Airlines CEO Lee Schofield told Executive Traveller in August, "but during the course of the 2021 financial year is when we'd expect to bring most, if not all of them in."
Schofield expects that Alliance's E190s could end up flying in a number of "slightly different configurations", including an all-economy layout and a two-cabin version with business class.
"We do like to have a bit of variability in the cabin configuration, and also we like to have the ability to change the interior configuration even while we are in service.”
Read more: Alliance embraces the Embraer E190
While the ACCC assesses this proposed two-year partnership with Alliance, it also continues to weigh up Qantas' interest in expanding its current 19.9% stake in the Brisbane-based carrier to what Qantas has described as "taking a majority position in Alliance Airlines in order to better serve the charter market by unlocking synergies."
"We view that as a compliment, as you expect, (but) we don't have any direct dealings with Qantas,' Schofield told Executive Traveller.
"The ACCC obviously expressed some concerns about that but from day one, we said 'Our role is just to get on with running a business'... and that's exactly what we have done, kept our head down and focused on running our own business successfully."
"Things that we can't control – like COVID, like an ACCC process, like a potential takeover – they'll resolve themselves one way or another."