The competition watchdog looks set to give Virgin Australia the thumbs up to continue its alliance with Etihad for another five years.
The Australian Competition and Consumer Commission said on Friday the arrangement, under which the airlines co-operate on joint pricing and scheduling, benefits consumers because Virgin would not otherwise operate services from Australia to Abu Dhabi.
"Virgin could not offer a viable service on the route without offering the beyond connections available on Etihad's network within the Alliance," ACCC chairman Rod Sims said.
"The ACCC considers this alliance would likely result in continued public benefits through promoting competition and enhancing the products and services offered to customers travelling between Australia and the Middle East and onward destinations throughout Europe."
The ACCC will make a final ruling on November 16.
"We have introduced more codeshare destinations, delivered further enhancements to the customer experience and more than doubled seat capacity between Australia and Abu Dhabi, through the launch of new routes, more flight frequencies and larger aircraft," Virgin Australia chief executive John Borghetti said.
"We welcome the ACCC's assessment of the public benefit the alliance brings to travellers."
The arrangement includes a codeshare agreement, as well as co-operation in sales and marketing, purchasing and procurement, and crew secondments.
Frequent flyer customers also get reciprocal lounge access.
"Today's announcement by the ACCC is great news for the partnership and for Australian travellers," Etihad president and chief executive James Hogan said.
"The partnership ... has generated significant benefits and increased revenue for each airline through the alignment of our operations.
Etihad Airways has a 24.2 per cent stake in Virgin Australia and holds a seat on the board.
