Australian budget airline Virgin Blue may stop flying its trans-Tasman route, Virgin Airlines founder Richard Branson warned, after regulators said they would block a proposed tie-up with Air New Zealand.
Australia's competition watchdog last week said it would likely scupper the proposed cooperation between Virgin Blue and Air New Zealand on flights between Australia and New Zealand because it could disadvantage customers.
Branson said it was now possible that Virgin Blue would no longer fly across the Tasman Sea, leaving Australian airline Qantas and its budget offshoot Jetstar to dominate the route.
"We're losing money on those routes to New Zealand," Branson told ABC Radio, in a report broadcast Monday.
"We think if we can work together with Air New Zealand we can offer a proper competitor to Qantas.
"If we can't have an arrangement like that there is a possibility that we would pull off the trans-Tasman," he said.
Virgin Blue's proposed alliance with Air New Zealand would have seen the carriers coordinate pricing, revenue management, schedules, capacity and routes.
The airlines said it would produce cheaper airfares, increased frequency, better connections, loyalty scheme reciprocity and expanded lounge access, and allow them to compete more effectively against the Qantas-Jetstar group.
But the Australian Competition and Consumer Commission (ACCC) said removing competition between Virgin Blue and Air New Zealand could leave more than one million passengers per year adversely affected.
Qantas/Jetstar has about a 31.5 percent market share of trans-Tasman traffic, while Air New Zealand has 35.9 percent and Virgin Blue 15.5 percent, the ACCC said.
Branson said he was puzzled by the decision, particularly as the watchdog had previously indicated it was open to a Qantas and Air New Zealand alliance.
"All we ask the competition authorities to do, is to treat Virgin Blue, which is a much smaller airline, in an equal way and allow us to create a level playing field," he said.
Meanwhile Qantas has lodged a submission opposing Virgin's proposed alliance with Etihad which would see Virgin's V Australia subsidiary enter a code-sharing arrangement including coordinated pricing and scheduling with the Abu Dhabi based carrier.