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Aussie green light for Scoot to enter LH/SQ pact

October 5, 2018 Headline News No Comments Email Email

Keenly priced travel between Australia and Germany stands to benefit from a decision by the Australian Competition and Consumer Commission (ACCC) to let Scoot into the joint-venture alliance operated by Singapore Airlines and Lufthansa.

In 2016, the ACCC authorised an alliance between Singapore Airlines and Lufthansa to coordinate their operations between Singapore Airlines’ home markets (Singapore, Australia, Indonesia and Malaysia) and Lufthansa’s home markets (Germany, Austria, Belgium and Switzerland).

Now the ACCC has authorised Scoot – a wholly owned subsidiary of Singapore Airlines and one of the world’s most competitive low-cost carriers, with an all B787 Dreamliner fleet – to enter the alliance, deciding that it represented only a “minor variation” of the existing arrangement.

Singapore Airlines and Lufthansa contended that since Scoot’s new flights from Singapore to Berlin (which started in June 2108) fell within the geographic scope of the existing joint venture agreement, they wanted authorisation to “explore the potential for coordination of pricing, sales, marketing and inventory management, in revenue sharing in a way that includes TR [Scoot] as well”.

“There will only be a minor addition regarding Australian destinations,” the applicants added.

“TR currently operates services to and from only a small number of destinations in Australia (being Coolangatta (Gold Coast), Melbourne, Perth and Sydney). Except for Coolangatta, each of these destinations is already included in SQ’s service offering in Australia. Further, TR’s services represent a relatively small proportion of the total return services per week to Australia operated by SQ and its other subsidiaries. This means that the quantitative effect on the conduct already reviewed by the ACCC is very limited.”

In deciding in favour of the proposal to include Scoot, the ACCC said it considered it unlikely that Lufthansa would begin standalone services to Australia over the period covered by the authorisation (until December 2021) “and the only route on which Scoot operates flights that Singapore does not also operate flights on is Coolangatta – Singapore.

“Therefore the ACCC considers that the addition of Scoot to the alliance does not change the nature of the coordination between Singapore and Lufthansa in a meaningful way.”

Not only was the proposal unlikely to reduce net public benefit, the ACCC said the opposite was likely.

“To the extent that the proposed minor variation to include Scoot in the alliance has any impact on public benefits, the ACCC considers that it is likely to increase them.

“In particular, the ACCC considers that the inclusion of Scoot may further enhance the products and services offered to some consumers.”

Scoot is free to enter the alliance later this month, from 19 October 2018.

Meanwhile, Scoot is offering some eye-watering fares. According to its website, you can fly from Sydney to Berlin on Saturday 20 October 2018 for AUD 462.84 economy, or AUD 1590.07 in ScootBiz business class.

Written by Peter Needham

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