British Airways and Qantas are set to win approval from Australia's Trade Practices Commission (TPC) for their controversial revenue pooling and price arranging plans for the loss-making Kangaroo Route, though with some tough conditions attached.
Approval will be strictly limited to cooperation on flights between Australia and Europe through Singapore and Bangkok. The TPC will also impose a review condition, under which it will study the arrangement at regular intervals to ensure pricing aspects of the scheme are not having a detrimental impact on ticket prices.
In a draft decision six months ago, TPC chairman Professor Allan Fells rejected the scheme out of hand as being anti-competitive and amounting to price fixing - it aims to bring annual benefits of up to A$90 million (US$67 million) to the two airlines.
But Fells came under mounting pressure from Canberra to change his mind. Four government ministers bombarded his office with submissions arguing that the deal was vital to the future of both Qantas and the nation. Qantas' management also held a lengthy series of meetings with Fells.
Qantas has always argued the anti-competitive tag is meaningless because the Kangaroo route is one of the most hotly contested in the world, with more than 30 airlines offering seats between Australia and Europe.
But Asian carriers feared the original arrangement would give BA and Qantas a significant market advantage, allowing them to pool resources and offer fares competitors couldn't hope to match. They foresaw a significant loss of market share if the partners were allowed to make similar arrangements in cities such as Hong Kong, Tokyo, Kuala Lumpur and Seoul.
The deal will enable Qantas to predict far better financial results in the prospectus for its July flotation; some analysts suggest if the alliance deal wasn't given the go ahead, up to A$400 million could be taken off the A$2 billion (US$1.5 billion) price-tag for the government's 75 per cent stake.
The deal will enable Qantas to predict far better financial results in the prospectus for its July flotation; some analysts suggest if the alliance deal wasn't given the go ahead, up to A$400 million could be taken off the A$2 billion (US$1.5 billion) price-tag for the government's 75 per cent stake.
Source: Airline Business
