The Australian Competition and Consumer Commission has said it will conditionally allow Virgin Blue to form alliances with Air New Zealand and Etihad, sending the company’s shares up nearly 5%.
The move comes after the ACCC originally rejected the proposal, saying it would lessen competition. The new plan will see Virgin Blue and Air NZ work together on the Trans-Tasman route, while the Etihad deal will allow the companies to work on routes to Abu Dhabi.
“The ACCC considers that the Alliance is likely to benefit passengers in a number of ways including more choice of routes and frequencies, and potentially lower fares as a result of cost savings and efficiency improvements,” ACCC chairman Graeme Samuel said.
“The ACCC is still concerned that the Alliance may affect competition on a number of routes between Australia and New Zealand, particularly routes involving Wellington. However, the ACCC has imposed a number of conditions on authorisation which are designed to address these competition concerns.”
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Virgin Blue shares rose 4.7% to 44.5c after the announcement was made. Air New Zealand welcomed the announcement, with chief executive Rob Fyfe saying that he was “pleased that formal approval has been given recognising the benefits this will bring to our customers”.
Meanwhile, NAB has said that it will strength the balance sheet of its British unit in preparation for an economic recovery.
“We are continuing to strengthen and reshape its balance sheet in preparation for the UK economy’s return to more stable conditions,” NAB chief executive Cameron Clyne said in a statement today.
ANZ chief executive Mike Smith has told the Senate inquiry into banking competition that the retail deposit market is currently intense and that more incentives are needed.
“Developing a significant Australian corporate bond market attractive to retail investors, and allowing the issuance of covered bonds, are directionally right,” he said.
Smith also said he would back plans for the Australian Office of Financial Management to spend $4 billion on residential mortgage-backed securities to the benefit of non-bank lenders.
“Further support for the securitisation market through the AOFM will assist funding of smaller lenders,” he said.
“Australian RMBS (residential mortgage backed securities) are of high quality and this approach can easily be switched off when it is no longer needed.”
Shares flat after weak overseas leads
The Australian sharemarket has opened flat today following fairly weak results from overseas markets.
The benchmark S&P/ASX200 index was up three points or 0.07% to 4771.2 at 12.15 AEST, while the Australian dollar has fallen to US98c.
AMP shares gained 0.6% to $5.29, while Commonwealth Bank rose 0.4% to $50.68. NAB rose 0.1% to $24.48 as ANZ fell 0.8% to $23.63.
Explosives manufacturer Orica has reaffirmed its profit guidance and expects to increase earnings through the year due to growth in North and Latin America.
“We see no reason to change the outlook for the business that we described at the release of our full year results,” managing director Graeme Liebelt said at the group’s annual meeting.
The confirmation comes after the company earned $619 million in the year to September.
“We are still in uncertain economic times and the recovery in the global economy is still quite patchy,” he said. “However, we are increasingly confident that the recovery is sustainable.”
Ten Network Holdings has appointed television division chief Grant Blackley as the company’s new chief executive.
“He has led Network Ten during a period of important strategic development and managed the business to withstand the challenges of the advertising downturn of recent years,” chairman Brian Long said in a statement.
United States passes tax deal
Legislation ensuring tax cuts for Americans along with the extension of jobless benefits passed through Congress overnight, passing through the Senate 81-19.
But while the bill is expected to pass through the House of Representatives, president Barack Obama has been criticised for making a deal with Republicans and giving up too much of the Democrats’ own agenda.
The legislation will extend tax cuts introduced by former president George Bush, which were set to expire at the end of the year. Analysts expect the legislation will boost economic growth but contribute to the $US1.3 trillion deficit.
Economists expect payroll tax concessions included in the package may contribute as much as 1% to economic growth.
However, the passage of the bill didn’t deliver a boost to Wall Street, with the Dow Jones Industrial Average falling 19 points or 0.17% to 11,457.47.
Meanwhile, Moody’s has said that Spain’s debt rating could be downgraded, given its high funding needs and heavily indebted banks.
“Moody’s believes that the… downside risks warrant putting Spain’s rating under review for downgrade,” analyst Kathrin Muehlbronner said in a statement.
“However, Moody’s also wants to stress that it continues to view Spain as a much stronger credit than other stressed Euro zone countries… Moody’s review will therefore most likely conclude that Spain’s rating will remain in the Aa range.”