Qantas: We’re at a disadvantage on the trans-Pacific

QF A380
Photograph: AirSpace user afkabruce98

I wish I could unite Brett Godfrey and Scott Swift so I could watch their jaws drop at Qantas claiming that with a 37% trans-Pacific market share last year, the largest of any airline or alliance, it is at a competitive disadvantage.

The disclosure was made in Qantas’s and American Airlines’ application to the US Department of Transportation for a trans-Pacific joint business agreement to coordinate schedules and fares (they applied with the ACCC last month). The oneworld carriers argue that “Without closer coordination, oneworld customers would lack the same opportunity for integrated alliance service between the U.S. and the South Pacific that Star already has with United and Air New Zealand, and that SkyTeam will soon have with Delta and V Australia.”

See here for what AA and Qantas propose under the JBA and what its benefits stand to be.

Godfrey founded and oversaw Virgin Blue, whose long-haul subsidiary V Australia was managed by Swift and in 2009 entered the trans-Pacific market, breaking the duopoly between Qantas and United. V Australia then partnered with other fledging Pacific entrant Delta to tackle the incumbents by forming a joint-venture, which last year would have achieved an 18% market share–half that of Qantas. But maybe Godfrey and Swift’s jaws would not drop.

They would form a grin: mission accomplished. They and the succeeding team–John Borghetti as chief executive, Merren McArthur looking after alliances, and Jane McKeon keeping an eye on government affairs–implemented a plan to their benefit and a detriment to their competitor. 

The Qantas-AA application comes not only after Qantas launched flights to American’s hub at Dallas/Ft Worth, offering far better connectivity (Qantas estimates 47% of its California passengers travel beyond the state), but as Qantas reviews its loss-making international network. The review will comprise a few more measures to be announced over the coming months, chief executive Alan Joyce told Flightglobal at the IATA AGM in Singapore this week. “There is no silver bullet to resolving this problem,” Joyce said, declining to divulge specifics.

Although loss-making, Qantas’ international network is tied to its profitable domestic network by way of providing 1) international services for the corporate sector in Australia or with interests in Australia and 2) a channel to use frequent flyer points earned on the domestic network. The two networks need each other, hence why Virgin Australia has partnered with Delta, Etihad, and Singapore Airlines to boost its international presence.

Now that Qantas claims it is at a disadvantage specifically on the trans-Pacific, as Delta and V Australia were, should it too receive a one-up in the form of regulatory clearance?

Many of the benefits Qantas and AA toot the JBA bringing can actually be implemented without regulatory approval. It could be argued those benefits are not in place because of complacency Qantas had between Ansett’s 2001 collapse and the economic downturn and V Australia’s formation late last decade. And now Qantas could be publicly using prospective regulatory clearance to cover up its latency. But the JBA application still has its merits.

The outcome of the DOT application is the same as the one to the ACCC: regulators need to decide if Qantas and AA should be allowed to further cooperate, akin to Delta & V Australia and Qantas & British Airways, when American Airlines has no plans to serve Australia and regulatory clearance could provide further disincentive–acts that are very much not in the public’s interest.

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