Up in the air

Published On 18/02/2014 | By Martine Phillips | Authorisations, Mergers

The Competition Commission of Singapore (CCS) is seeking feedback on two new proposed airline alliances, Scoot with Tiger Airways and Singapore Airlines with Air New Zealand.

Scoot and Tiger Airways have agreed to cooperate with one another in relation to pricing, sales and marketing (among other things) on international passenger flights except on routes between Singapore and Australia. The reason for the agreement is to improve the overall quality of service offered to passengers.

Singapore Airlines and Air New Zealand are proposing to enter into a strategic alliance also for international passenger flights but on all routes. This alliance involves expanding the airlines’ international flight networks between Singapore and New Zealand through code-sharing, integrating passengers’ frequent flyer and other loyalty benefits, and enhancing passenger services such as transfers, lounge access and disruption recovery times.

Each proposed alliance has filed a notification for decision (the Singapore equivalent of an authorisation application) with the CCS in respect of potential breaches of section 34 of the Singapore Competition Act.  That section prohibits agreements between undertakings, decisions by associations of undertakings or concerted practices, which have as their object or effect the prevention, restriction or distortion of competition within Singapore.  However, agreements can benefit from an exclusion under section 9 of the Act if they can establish that the agreement will result in a net economic benefit.  The CCS is seeking public feedback and closing submissions, for both, are due by 26 February 2014.

Airline alliances have been in the news a lot recently (see here for examples), and in most cases are cleared with no or few conditions.  However, the American regulator has shown that where airlines go one step further to merge, structural remedies will be considered.  In considering the proposed US Airways/American Airlines merger, the DOJ developed a theory of harm based on city pairs and competition through discounts – read more here.  A settlement was proposed to the Court in November 2013, which required the parent of the merged entity to divest slots and gates at key constrained airports across the country to low cost carrier airlines in order to enhance system-wide competition in the airline industry resulting in more choices and more competitive airfares for consumers.  Under the proposed settlement, the DOJ will appoint a monitoring trustee to oversee the divestitures or transfers of the slots and gates.

Photo credit: Mauricio Ulloa | Flickr

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About The Author

is in the Competition team at King & Wood Mallesons, with experience both in the corporate and litigious sides of competition. She loves online shopping and always looks for the fine print!

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