The first of what could be a number of potential challenges to a proposed joint venture between Australia's Virgin Blue and Delta Air Lines Inc. (NYSE:DAL) emerged on Friday, with Singapore's Tiger Airways Ltd. announcing plans to file a formal objection with Australia's competition regulators.
Delta and Virgin Blue
announced earlier this month they would seek approval to coordinate their operations between the U.S. and Australia. The companies hope to pool revenue on trans-Pacific flights and offer each other's passengers connections on Delta flights in the U.S. and Virgin Blue flights to South Pacific destinations.
Although Tiger does not compete across the Pacific, company CEO Tony Davis
told The Australian that his airline objects to the anticompetitive nature of the tie-up. Another possible motivation: Singapore Airlines Ltd., a major Tiger shareholder, is an active competitor on routes between the U.S. and the region and has tried unsuccessfully for years to win government approval to fly between Australia and the U.S.
Tiger's objection is expected to be the first of many with UAL Corp.'s (NASDAQ:UAUA) United Airlines Inc., which also flies between the U.S. West Coast and Australia and could be left at a competitive disadvantage without a partner Down Under should the joint venture be approved, and Air New Zealand as possible opponents.
Still, most in the industry believe the application will ultimately be approved. Virgin Blue's long-haul V Australia unit has been losing money on its U.S. flying, and could disappear from the market absent the joint venture. Delta, meanwhile, is the newcomer to the route and likely needs the local feed and connections from Australia if it is to remain competitive against more established players like United and Qantas Airways Ltd., a partner of American Airlines Inc. (NYSE:AMR) in the U.S. -
Lou Whiteman
Lou Whiteman is a senior writer covering the automotive, transportation and industrial sectors. Follow him on Twitter @louwhiteman
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