By Courtney Trenwith
Founder of Virgin Atlantic and Virgin Australia says tie-ups are stifling competition, will increase fares
Virgin founder Richard Branson on Monday criticised alliances between major carriers, including the Emirates-Qantas tie-up, as stifling competition and claimed it would lead to increased prices.
Branson, whose Virgin Group part-owns UK-based Virgin Atlantic and Virgin Australia, said governments should have prevented partnerships such as that between Dubai's Emirates and Australian flag carrier Qantas, as well as between British Airways and American Airlines.
The BA-AA partnership formed four years ago brought together two of the world's largest airlines amid claims it would drive down prices on the routes between the two countries.
The airlines had had their alliance application rejected numerous times before it was finally approved in February 2010, in what Branson described as the airlines “finally finding a weak regulator”.
“That then caused us to go along to Delta and say 'we need a big brother now',” Branson said, refering to Virgin Atlantic's “forced” alliance with America's other big airline.
“And the regulators have allowed Qantas and Emirates to get together, and so there's no real competition on that route [between Australia and Dubai].
“Good government would never have allowed that to happen and you've now got less than a handful of big carriers around the world and prices will go up as a result.
“And it's going to be incredibly difficult for any new airline to ever, ever, ever get up and compete with that.”
Branson blamed governments for not stepping in to maintain competition for passengers.
“Any company owner or chief executive, their job is to try to monopolise and the government's job should be to stop them monopolising,” he said.
“Competition brings better fares and better quality than cooperation but the regulators in their wisdom have decided to create a number of very big, very big alliances.
“If you're in an alliance and you're on the same route as your alliance partner, you know what's going to happen: fares are going to go up and why should they do better service?”
During his visit to Dubai on Monday, Branson also made his first public comments about Virgin Atlantic's surprise decision earlier this month to cease operating services between Australia and Hong Kong, which also connected to London and the US.
The airline had been losing about $10m a year on the route and increased costs and a falling Australian dollar had made it unviable, he said.
“I suspect we carried on going too long and that's always a danger in business, you hope that next year will be better than the previous year," he said.
"I love going to Australia and the idea of having to go on Qantas or British Airways is going to be very, very painful. But hopefully we'll be back one day.
“We have a great Virgin Australian airline when you get there, which has got 35 percent of the market, so we're just going to have a bag over our heads for that one leg, from Hong Kong onwards [from London], sadly, in the future.”
The article fails to mention the partnership between Etihad and Virgin Australia.
It's true, they position it as a benefit to consumers but when there is no competition (Qatar Airways DOH - LHR for example) the airlines just charge what they want.
You only need to check out the Emirates price increases to see its not for the benefit of the customers. Hopefully the competitors will hang on in there but I'm sure Emirates will slowly push them out.
I agree with SRB's comments about prices on CERTAIN routes (but not all, alliances cmpete between each other and with independents on many routes), but disagree with his question "why should they do better service". One only has to look at the business class innovations being brought in by LH, Air France, KLM, Cathay, American and others to realise that there is intense competition on service. Take Hong Kong-London - BA and CX (alliance partners) compete fiercely on that route. Currently CX are winning in revenue terms - more flights, and a better onboard product means they are usually more expensive than their alliance "partner". Conversely, BA are competing on price, and have put their flagship A380 on the route, and are also offering oneway upgrades to First. So price and service competition is alive and well on that route, even between two alliance partners.