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Competition watchdog seeks public feedback on proposed Singapore Airlines, Vistara cooperation

Competition watchdog seeks public feedback on proposed Singapore Airlines, Vistara cooperation

File photos of Singapore Airlines and Vistara planes on the tarmac. (Photos: AFP)

SINGAPORE: The Competition and Consumer Commission of Singapore (CCCS) is seeking public feedback on a proposed cooperation agreement between Singapore Airlines (SIA) and Vistara. 

A joint venture between Tata Sons and SIA, Vistara began operating direct flights between Singapore and Delhi, as well as between Singapore and Mumbai in 2019, prior to the COVID-19 pandemic. 

READ: Singapore Airlines to prioritise cargo capacity for transportation of COVID-19 vaccines

The competition watchdog on Tuesday (Dec 8) said it received a joint application from the airlines on Nov 30 and is now assessing whether the proposed cooperation would infringe section 34 of the Competition Act. 

It prohibits agreements or concerted practices by undertakings which prevent, restrict or distort competition within any market in Singapore.

'UNLIKELY TO RESULT IN ANY ADVERSE EFFECTS ON COMPETITION'

The proposed cooperation comprises a commercial cooperation framework agreement that the airlines entered into on Feb 13, 2020, in which they agree to cooperate on scheduling, pricing, sales and marketing, and other commercial areas.

This includes prorate arrangements and expanded code sharing to grow traffic between Singapore and India, as well as between India and "certain agreed markets".

"Subject to the agreement of the parties, the proposed cooperation will extend to include SilkAir (Singapore) and potentially to the operations of Scoot Tigerair (both wholly-owned subsidiaries of SIA)," said CCCS.

SIA and Vistara submitted that they overlap on 16 origin-destination air passenger transport routes between Singapore and India - both on a direct and non-direct basis, said the competition watchdog.

The airlines said that the proposed cooperation is "unlikely to result in any adverse effects on competition", according to the CCCS media release. 

READ: Commentary: Bitter truths for Singapore Airlines about this aviation industry crash

According to SIA and Vistara, the aggregation in passenger shares for the parties is not significant on the overlapping routes. 

They added that the companies are already economically connected, with SIA owning a 49 per cent stake in Vistara and Tata Sons owning the remaining 51 per cent.

The passenger shares and volume on the flights between Singapore and Bhubansewar, Singapore and Guwahati, Singapore and Goa as well as Singapore and Port Blair indicate there would "unlikely be any actual adverse effect on competition", the parties said, adding that there are many existing competitors on the overlapping routes. 

The barriers to entry on the overlapping routes are low, facilitating entry by potential competitors. Entry is "possible", and has occurred frequently and recently, particularly by carriers that operate one-stop flights, said the airlines.

'SIGNIFICANT CONSUMER, ECONOMIC BENEFITS' 

The parties submitted that the proposed cooperation would result in "significant" consumer and economic benefits, said CCCS. 

This includes the increased likelihood of "an expedited and more sustainable reinstatement of capacity" in the current COVID-19 situation, as well as improved connectivity for both Singapore and India. This will lead to benefits for both countries' aviation industries and tourism sectors, said the firms.

They added that there would also be increased potential for the airlines to add capacity and/or introduce new routes, and that fare availability would be improved at all levels as a result of pricing coordination.

READ: Commentary: COVID-19, the biggest crisis ever for Singapore’s aviation industry and Singapore Airlines

The airlines also said that there would be more competitive fares through the reduction of double marginalisation.

This would bring about benefits to SIA's and Vistara's corporate account customers and members of the airlines' frequent flyer programmes, the airlines said.

Members of the public who wish to provide feedback can do from Dec 8 to Dec 21. More information on the public consultation can be found on the CCCS website at www.cccs.gov.sg under the section Public Consultation.

Source: CNA/ad

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