Australia's REX is taking aim at a submission by Virgin Australia and Alliance Airlines to co-operate on 41 regional routes and two short-haul international routes. The application is currently before Australia's competition watchdog, the Australian Competition and Consumer Commission (ACCC). However, in a letter to the ACCC, REX is opposing any interim authorization, saying it will allow the sharing of highly sensitive non-public information.

REX argues against the Virgin Australia / Alliance Airlines proposal

Before its collapse in April, Virgin Australia had a longstanding partnership with Brisbane-based Alliance Airlines. With its Fokker fleet, Alliance Airlines operated a lot of charter and scheduled regional passenger flights for Virgin Australia.

Now relaunched, Virgin Australia and Alliance want to renew the arrangement. It's more important than ever for Virgin Australia, given they are now exclusively flying Boeing 737-800s that are too big for many regional routes.

Among other things, under the current application, Virgin Australia and Alliance Airlines wanted to share information. This would include information about costs, willingness to operate, capacity, utilization, anticipated demand and pricing, across the 40 regional and two international routes.

REX argues this information sharing would open a pandora's box. They say, of the 40 plus routes Virgin Australia and Alliance Airlines want to share information about, both presently fly on only one of those routes. Further, of those 40 plus routes the application covers, neither Virgin Australia nor Alliance Airlines operate on 23 of them.

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According to REX, granting interim authorization is akin to letting Virgin Australia and Alliance Airlines wargame future regional routes.

"Interim authorization would allow the parties immediately to start sharing cost information, strategic entry plans, and future pricing. It will allow them to discuss matters such as agreeing not to enter each other’s sole operator routes or agreeing that only one will enter routes neither currently operates," the letter to the ACCC states.

"Allowing competitors to share such sensitive information under an interim authorization carries significant risk as knowledge is not reversible; the parties simply cannot stop knowing what they know if final authorization is denied."

Application has some support, Qantas non-commital

Submissions to the ACCC from Queensland Airports Limited and the Northern Territory Department of Industry, Tourism, and Trade support the application by Virgin Australia and Alliance Airlines.

"Businesses have needed to develop innovative solutions to deal with this altered operating environment, particularly in markets where there is one dominant carrier. It is our view that arrangements like the one proposed by Virgin and Alliance are an example of this," wrote Queensland Airports Limited CEO, Chris Mills.

When asked about the Virgin Australia / Alliance Airlines application yesterday, Qantas CEO Alan Joyce effectively shrugged his shoulders. Whatever happened, he suggested, neither airline had the network capacity to seriously challenge Qantas.

REX has a long history of complaining about competitive threats and zealously guards its turf. With international and internal border closures, Australia's big airlines have a renewed interest in regional flying, REX's traditional playing field.

That's upset REX, with the airline pulling off several routes other airlines have entered onto. Meanwhile, REX is continuing with expansion plans of its own. Jet services between Sydney and Melbourne and Sydney and Brisbane are set to commence in March 2021.

The application gets the interim tick of approval

Despite REX's best efforts, the ACCC has today granted the Virgin Australia / Alliance Airlines application interim authorization. The interim authorization covers all the routes in the original application. According to a decision just released by the ACCC;

"The proposed cooperation is also likely to result in a range of associated public benefits, including more efficient and sustainable operation of services by the Applicants, better connectivity and facilitating increased competition on some regional routes."

Virgin Australia welcomed the news, a spokesperson telling Simple Flying;

"We recognize our role in providing heartland communities and businesses in regional Australia with choice and convenience.

"Through this initiative, we’ll be able to further cooperate with Alliance on

new destinations and travel arrangements for customers."

The next stage in the decision-making process is a draft decision, likely to be released early next year.