The proposed alliance between Virgin Blue and Air New Zealand has received a no go from the Australian Competition and Consumer Commission (ACCC) after the commission submitted a draft decision denying authorisation for the airlines’ alliance.

The proposal submitted by the airlines to team up on flights between Australia and New Zealand has received its first denial from the ACCC based on concerns over reduced competition.

“The ACCC considers that the alliance is likely to reduce competition in the market for trans-Tasman air passenger services," ACCC chairman Graeme Samuel said.

"The ACCC believes that Virgin Blue is a significant competitor to Air New Zealand and there are a number of trans-Tasman routes where the alliance raises competition concerns.”

“These routes account for around one quarter of passenger traffic in the trans-Tasman market. This means that more than one million passengers per year may be adversely affected by the removal of competition between Virgin Blue and Air New Zealand."

Despite acknowledging the alliance would provide public benefits in terms of costs and efficiencies, the airlines failed to convince the commission they would “create a dynamic in the trans-Tasman market that is fundamentally more competitive than a scenario where Virgin Blue and Air New Zealand continue to operate independently”.  

Air New Zealand said they are currently reviewing the ACCC draft and will respond to concerns over the coming weeks.

The ACCC has awarded the airlines and interested parties 14 days to submit further information.