The Australian Competition and Consumer Commission, which is the competition regulator in the country, have given a tentative approval Virgin Australia for extending its alliance with Air New Zealand for another three years on the trans-Tasman routes.

The approval will come with conditions requiring the airlines to maintain a certain number of flights on the route. The regulator did not agree to grant an approval to the extension of the deal for a period of five years citing the dynamic nature of the industry.

The regulator said that it is planning to approve the alliance as it will bring benefits to the public as the two airlines can link each other's domestic networks. It also believes that the Virgin's operations on the route would be limited without the alliance.

"Combining the networks of the two airlines allows them to offer enhanced products and services, such as new frequencies and increased access to loyalty-program benefits and lounges," ACCC commissioner Jill Walker said.

The regulator also believes that the Air New Zealand will face a competitive disadvantage to the alliance between Qantas and Emirates on the route.

Shares in Virgin fell 1.1 per cent to 44.5 cents in early trading on Wednesday while Air New Zealand was flat at $1.22.