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Virgin Australia will no longer be allowed to collude with Alliance Airlines on bidding for fly-in, fly-out routes for the resource sector after the competition watchdog severed the five-year partnership.
The airlines are the second and third largest providers of FIFO services in Australia and the lack of competition could tempt them to reduce service quality or raise flight prices, ACCC chairwoman Gina Cass-Gottlieb said,
"The airlines have not demonstrated to us that there's sufficient public benefit to outweigh the likely detriment from their proposed coordination," she said on Friday.
The partnership between Virgin and Alliance on flight bidding has been going for five years but the watchdog said there were no obvious benefits.
"The agreement to not compete for each other's customers, while not always implemented to date, is also likely to reduce competition and incentives for the airlines to invest and innovate," Ms Cass-Gottlieb said.
The ACCC in November sought submissions on its draft determination to deny an extension of the agreement.
From the submissions, the watchdog said it found some support for the partnership but not enough to grant an extension to the five-year agreement.
Virgin Australia said it was disappointed by the move, arguing the partnership provided "an enhanced service to FIFO customers in Western Australia and on the east coast".
"Virgin Australia is committed to continuing to service its charter customers and we are working through the implications of this decision," a spokesperson said on Friday.
