The competition watchdog has given the green light for a trans-Tasman airline alliance between Virgin Australia and Air New Zealand to continue for another five years.

Australian Competition and Consumer Commission (ACCC) Commissioner Jill Walker said the alliance of the airlines’ respective domestic networks would likely result in material public benefits.

“The alliance will allow the two airlines to offer enhanced products and services, such as new frequencies and increased access to loyalty program benefits and lounges,” Dr Walker said.

“This is likely to promote competition on trans-Tasman routes, particularly for business travellers.”

The ACCC said the alliance was unlikely to reduce competition on most trans-Tasman routes, but it may affect competition on some of them.

Therefore, the ACCC required that Virgin Australia and Air New Zealand maintain an aggregate base capacity across these routes.

Those conditions came as it granted conditional reauthorisation for the partnership until October 31, 2018.

The ACCC will review the airlines’ capacity additions in light of actual demand growth over the next two years.

The review will start in September 2015.

The airlines must also provide performance data to help the ACCC assess whether the alliance is adversely affecting competition.

Both airlines welcomed the ACCC’s approval.

Shares in Virgin Australia gained 1.5 cents to 42 cents.