Competition watchdog raises Worries over Cathay-Qantas codeshare

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A pair of Airbus A330s from Qantas and Cathay Pacific in Sydney Airport. (Rob Finlayson)

Australia’ s competition watchdog and Virgin Australia have argued a proposed codeshare agreement between Cathay Pacific and Qantas would result in a lowering of competition.

“ While it’s a decision for the IASC to make, our principal competition concern is that the behavior may soften competition in the Australia-Hong Kong aviation passengers solutions marketplace, ” the ACCC entry said.

Meanwhile, the Cathay Pacific would add its CX airline code on these three trunk paths on 35 Qantas-operated services a week.

The codeshare flights on these routes would just be marketed within a through journey between connections either beyond Hong Kong on Cathay Pacific or to other Australian national destinations from Brisbane, Melbourne and Sydney on Qantas.

The ACCC said permitting the codeshare could make it easier for Cathay Pacific and Qantas to organize with their cost and capacity choices to raise prices or reduce service for Australia-Hong Kong passengers with Australian national relations or beyond Hong Kong to destinations in Asia.

“ for instance, this may include delaying the installation of further power between Australia and Hong Kong, ” the ACCC said.

What’s more, the competition regulator said determining whether there was aggressive harm would rely on factors such as the significance of linking passengers on Cathay Pacific and Qantas’ s Australia-Hong Kong flights along with the extent to which Virgin Australia would respond to the codeshare agreement.

Concerning the possible Virgin Australia response, the ACCC said: “ Here it will be closely related contemplate not only whether Virgin could disrupt, but whether Virgin would be likely to disrupt any kind of competition between Qantas and Cathay. It may be more profitable for Virgin to not disrupt a softening of competition involving two largest carriers. ”

Beneath an agreement which was struck at the second half calendar 2018 , Cathay Pacific already sells codeshare services on flights operated by Qantas in the Australian domestic market, whereas Qantas sells itineraries which include a Cathay Pacific-operated flight beyond Hong Kong to amount of nations in Asia, in addition to Cathay’ s Perth-Hong Kong and Cairns-Hong Kong.

In December 2018, Qantas employed into the IASC to expand the codesharing to include each other’ s flights from Brisbane, Melbourne and Sydney to Hong Kong, in Addition to incorporate its QF airline code on additional Cathay Pacific-operated flights into Asian factors in Myanmar, Sri Lanka and Vietnam.

Instead, it was a “ pro-competitive growth of each carrier&rsquo ability to market and market itineraries”.

Virgin Australia, that advised the IASC in early February it had major concerns with the codeshare, said in its latest entry the program should be rejected.

Additionally, it said some of the pro-consumer advantages that Qantas summarized in its entry, such as the extra codeshares on Cathay Pacific-operated flights beyond Hong Kong into Asia, did not require IASC approval.

“ it’s important to note that the variant requested by Qantas is not necessary to contribute to these itineraries and relates solely to flights operated by Qantas on businesses which Cathay Pacific functions in parallel, ” Virgin Australia explained.

“ The program ought to be rejected on the basis this proposed use of the appropriate capacity won’t be of advantage to the public. ”

A file image of Cathay Pacific and Qantas aircraft at Sydney Airport. (Rob Finlayson)

A file picture of Cathay Pacific and Qantas aircraft. (Rob Finlayson)

Statistics in the Virgin Australia entry showed Cathay Pacific and Qantas held a joint 92 per cent passenger discuss between Australia and Hong Kong.

“ While the proposed cooperation will deliver marginal benefits for consumers, it will raise the person and collective market power of those 2 carriers, in the expense of Virgin Australia since the only other competitor to the road, ” Virgin Australia explained.

“ This is likely to significantly erode competition in the marketplace for flights between Australia and Hong Kong, for the detriment of the traveling public and Australian tourism and commerce. ”

Virgin Australia started flying to Hong Kong at July 2017, as it started nonstop flights from Melbourne for the Special Administrative Region (SAR).

Virgin Australia Airbus A330-200 VH-XFD operating the inaugural VA87 from Melbourne to Hong Kong on July 5 2017. (Virgin Australia)

Virgin Australia Airbus A330-200 VH-XFD operating the inaugural VA87 from Melbourne to Hong Kong on July 5 2017.

Qantas chief executive Alan Joyce said recently his airline and Cathay Pacific would remain vigorous competitors even with the expanded codeshare agreement set up.

“ We compete very vigorously within the Hong Kong marketplace, our company is competitors onto it and we guard every passenger, ” Joyce told colleagues in the business ’ s 2018/19 first half results presentation on February 21 .

“ However there’s complaints about you know everything that we’ re doing with partners right now, whether it’ s Cathay, Air New Zealand, other codeshare agreements and there’s a little sour grapes coming to it, I believe.

“ We’ ve got a fantastic relationship with one of these carriers, we’re extremely competitive with them and when we can leverage things to enhance the proposition for the clients, of course we’ re going to take action. But that’ s not anti-competitive, that’ s improving competition. ”