Virgin Australia and the Australian Competition and Consumer Commission (ACCC) have raised concerns that competition on Australia-Hong Kong routes will reduce if Qantas and Cathay Pacific codeshare on each other’s services.
The airline and the regulator outlined their concerns in separate submissions to the International Air Services Commission, which is weighing an application that would allow Cathay and Qantas to codeshare on each other’s services between Hong Kong and Brisbane, Sydney and Melbourne.
Virgin is objecting to the Qantas application, stating that authorising it would “undoubtedly increase the individual and collective market power of the two carriers, at the expense of Virgin Australia as the only other competitor on the route.”
Cirium schedules data shows that, in February, Cathay operates around 63% of all seats between Australia and Hong Kong, followed by Qantas at 25%, and Virgin with the remainder.
Virgin also attacked Qantas’s justification that the codeshare would make it easier for passengers to connect to destinations in India, Myanmar, Sri Lanka and Vietnam – stating that passengers can already make those connections without the codeshare.
“It is important to note that the variation requested by Qantas is not required to give effect to such itineraries and relates solely to flights operated by Qantas on sector which Cathay Pacific operates in parallel.”
In its submission, the ACCC said that its main concern was that the codeshare “may soften competition” for Australia-Hong Kong passengers as it could make it easier for Qantas and Cathay to co-ordinate pricing and capacity.
The ACCC noted that determining the level of competitive harm would require further scrutiny of other factors, such as the importance of connecting traffic on each carrier’s Australia-Hong Kong services, and the likelihood that Virgin could bring more competition to the routes.
“It may be more profitable for Virgin to not disrupt a softening of competition between the two largest carriers,” it noted.
Source: Cirium Dashboard