Competition watchdog seeks feedback on proposed commercial tie-up between SIA and Vietnam Airlines

[SINGAPORE] The Competition and Consumer Commission of Singapore (CCS) is seeking the public’s feedback on the proposed commercial cooperation between Singapore Airlines (SIA) and Vietnam Airlines from Wednesday (Apr 8) to Apr 22.

The competition watchdog accepted a joint application from SIA and Vietnam Airlines on Monday, requesting a decision on the tie-up.

A statement on Wednesday said that under the joint venture, both parties would cooperate on matters such as scheduling, pricing, sales and marketing and in other commercial areas. This creates a metal-neutral alliance for services between Singapore and Vietnam, implying that capacity and pricing are jointly managed, with some degree of equal profit sharing.

The scope of the proposed cooperation excludes the two carriers’ low-cost subsidiaries – Scoot is SIA’s budget carrier, and Pacific Airlines is Vietnam Airlines’.

The two airlines declared that they overlap on five origin-destination routes in the provision of international air passenger transport services between Singapore and Vietnam, both on a direct and non-direct basis.

They added that such routes form the relevant markets for the purposes of the competitive analysis of the proposed cooperation.

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Adverse effects on competition are unlikely, said the two parties, in light of how both airlines will continue to face intense competition from low-cost carriers on the direct overlapping routes. Additionally, the existing low barriers to entry on the direct overlapping routes are facilitating entry by potential competitors as well.

Consumer and economic benefits to this arrangement cited by the airlines include more competitive fares; improved connectivity for both Singapore and Vietnam; and benefits for members of both airline’s frequent flyer programme beyond Star Alliance/Skyteam arrangements.

CCS is now assessing whether the proposed cooperation would breach Section 34 of the Competition Act 2004 – the part of the Act which bars agreements or concerted practices by undertakings which prevent, restrict or distort competition within any market in Singapore. The closing date for submissions of public feedback is 5 pm on Apr 22.