Virgin Blue and middle-east airline Etihad have been given a provisional go-ahead by the competition regulator to form a pricing and scheduling alliance.
The Etihad decision isn't final, as the regulator is still accepting submissions from third parties.
Under the alliance, Virgin Blue (through its V Australia international brand) and Etihad had proposed to cooperate on joint ticket pricing and flight scheduling across their networks -- activity that would be considered illegal without approval by the regulator.
The ACCC said its view was that the alliance was unlikely to result in any public detriment, since Virgin Blue and Etihad do not currently directly compete on any existing routes. "The ACCC considers that the Alliance is likely to promote competition and result in benefits for Australian consumers through new international services and increased online connections," ACCC chairman Graeme Samuel said.
The deal is a win for Qantas defector John Borghetti, now CEO of Virgin Blue, as it means Etihad will be abandoning its existing alliance with Qantas.
V Australia and Etihad will now share a new purpose-built airline lounge at Sydney airport and the two airlines have signalled that they may even consider buying aircraft jointly to increase their bargaining power and reduce costs.
Etihad Guest and Virgin Blue Velocity frequent flyer programs will also be fully reciprocal, with passengers having been able to burn miles on both programs since October 1.
The alliance means V Australia will fly Sydney to Abu Dhabi three times a week, and with the combined route network of both airlines will offer flights to 100 destinations across Europe, the UK and the Middle East, significantly boosting the reach of the V Australia brand as a competitor to Qantas.
It is a good day for Virgin Blue, with the competition regulator also authorising its alliance with Air New Zealand, which will allow for up to 80 more flights across the Tasman each week.