Virgin Australia opposes Cathay-Qantas codeshare

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January 23, 2019
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Virgin Australia has opposed a move by Qantas and Cathay Pacific to codeshare on Australia-Hong Kong routes, saying it holds significant concerns about the concentration of market power.

The two airlines, who are both parts of the oneworld alliance, announced last September that they had inked a new codeshare deal that would make it easier for frequent flyer members to earn points and status credits on each other’s flights.

The deal sees  Qantas add its code to Cathay Pacific and Cathay Dragon flights from Hong Kong to India, Myanmar, Sri Lanka and Vietnam, and on Cathay Pacific’s long-haul services from Hong Kong to Perth and Cairns.

Cathay adds its code to 13 routes on Qantas’ domestic network in Australia, including Adelaide-Melbourne, Alice Springs-Sydney, Brisbane-Cairns, Brisbane-Melbourne, Darwin-Perth, Hobart-Melbourne and Melbourne-Sydney.

READ frequent flyers benefit from new Qantas, Cathay codeshare.

In January,  Qantas put in an application asking for a variation to allow Cathay to codeshare on Qantas flights on the Hong Kong route.

Virgin argued in a submission to Australia’s International Air Services Commission (IASC) that the January application would be detrimental to travelers.

“As the only other operator of flights between Australia and Hong Kong, Virgin Australia holds significant concerns the proposed variation of the determination will result in an unnecessary expansion of both Qantas and Cathay Pacific’s market power, to the detriment of the travelling public,’’ the submissions says.

“Qantas and Cathay Pacific currently dominate the Hong Kong route, holding a combined frequency share of 88 percent and a combined seat capacity share of 90 percent.

“In the 12 months ending October 2018, both airlines recorded passenger load factors exceeding 80 percent and together carried 92 percent of all passengers travelling between Australia and Hong Kong.”

The submission says  Virgin and Hong Kong Airlines (HKA) carried the balance of passengers on the route, recording passenger load factors during the same period of 66 percent and 61 percent,  prompting HKA to withdraw from the route in October.

Virgin has called on the commission to assess criteria such as competition, tourism and trade in its assessment of whether it would benefit the public.

It also argues the Qantas application does not provide enough information for interested parties such as itself and the Australian Competition and Consumer Commission to properly assess and comment on the application.

“Notwithstanding the paucity of information in Qantas’ application, any strengthening of the cooperation with Cathay Pacific is likely to increase the market power that the two carriers individually and collectively hold on the Hong Kong route,’’ it said

“This would inevitably diminish the competitive forces in the market and may lead to higher airfares and reduced choices for customers, with corresponding implications for Australian tourism and trade.”

Qantas defended the codeshare.

“Our codeshare with Cathay Pacific has delivered great benefits for our customers since we launched in October last year,” a spokesman said.

“We’re now looking to expand the codeshare further to create more options for travelers and will continue to engage with the IASC process over coming weeks.”