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SINGAPORE: The Singapore Competition and Consumers Commission (CCCS) is seeking public comment on a proposed cooperation agreement between Singapore Airlines (SIA) and Vistara.
Vistara, a joint venture between Tata Sons and SIA, began operating direct flights between Singapore and Delhi, as well as between Singapore and Mumbai in 2019, ahead of the COVID-19 pandemic.
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The competition watchdog said on Tuesday (December 8) that it received a joint request from the airlines on November 30 and is now evaluating whether the proposed cooperation would violate section 34 of the Competition Law.
It prohibits agreements or concerted company practices that prevent, restrict or distort competition in any Singapore market.
‘IT IS UNLIKELY TO PRODUCE ADVERSE EFFECTS ON COMPETITION’
The proposed cooperation comprises a commercial cooperation framework agreement that the airlines entered into on February 13, 2020, in which they agree to cooperate on scheduling, pricing, sales and marketing, and other business areas.
This includes prorated agreements and expanded codeshare to increase 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 be extended to include SilkAir (Singapore) and potentially the operations of Scoot Tigerair (both wholly owned subsidiaries of SIA),” said CCCS.
SIA and Vistara alleged that they overlap on 16 origin-destination air passenger transport routes between Singapore and India, both directly and non-directly, the competition regulator said.
The airlines said the proposed cooperation is unlikely “to have adverse effects on competition,” according to the CCCS press release.
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According to SIA and Vistara, the aggregation in the parties’ passenger quotas is not significant on the overlapping routes.
They added that the companies are already economically connected, as SIA owns a 49 percent stake in Vistara and Tata Sons owns the remaining 51 percent.
Passenger ratios and volume of flights between Singapore and Bhubansewar, Singapore and Guwahati, Singapore and Goa, as well as Singapore and Port Blair indicate that “there is unlikely to be a real adverse effect on competition,” the parties said. , and they added that there are many existing competitors on the overlapping routes.
Barriers to entry on overlapping routes are low, making it easy for potential competitors to enter. Entry is “possible,” and has occurred frequently and recently, particularly by airlines operating single-stop flights, the airlines said.
‘SIGNIFICANT CONSUMER, ECONOMIC BENEFITS’
The parties argued that the proposed cooperation would result in “significant” economic and consumer benefits, the CCCS said.
This includes the increased likelihood of “an accelerated and more sustainable capacity restoration” in the current COVID-19 situation, as well as improved connectivity for both Singapore and India. This will generate benefits for both countries’ aviation and tourism industries, the firms said.
They added that there would also be greater potential for airlines to add capacity and / or introduce new routes, and that fare availability will improve at all levels as a result of price coordination.
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Airlines also said there would be more competitive fares by reducing double marginalization.
This would generate benefits for SIA and Vistara corporate account customers and members of the airlines’ frequent flyer programs, the airlines said.
Members of the public who wish to provide feedback can do so from December 8-21. More information on public consultation can be found on the CCCS website at www.cccs.gov.sg in the Public Consultation section.
