Thursday, September 09, 2010

US knocks back Virgin Blue, Delta Air Lines deal

In a surprise move, the US Department of Transportation issued a preliminary ruling rejecting an alliance between loss-making V Australia and Delta to co-ordinate fares, schedules and marketing across the Pacific.

The agency said the two carriers had failed to show that there would be "sufficient public benefits" such as lower prices or increased service to justify an exemption from US anti-trust laws.

Virgin Blue announced yesterday that both airlines would work with the department and respond to concerns over a 14-day appeal period.

The Brisbane-based carrier said that it "strongly believes the proposed alliance with Delta will be good for consumers".

Shares in Virgin Blue, which had rallied after last month's full-year results, lost more than 3 per cent, or 1.5, to close at 43.

The US decision is at odds with the Australian Competition and Consumer Commission, which had approved a revenue-sharing deal between V Australia and Delta last December.

Chairman Graeme Samuel said the arrangement would benefit consumers and deliver "more sustainable competition" on the route, which is now dominated by Qantas and also serviced by United Airlines.

The problem throws a spanner into plans by Virgin Blue chief executive John Borghetti to recalibrate international operations, which include a new partnership with Middle East carrier Etihad Airways.

Virgin Blue is also awaiting approval for a tie-up with Air New Zealand across the Tasman. Delta, the world's biggest airline, already has joint ventures with at least two European airlines flying the Atlantic.

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