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IASC rejects Qantas and Cathay codeshare plan to HK

May 28, 2019 Headline News No Comments Email Email

Australia’s International Air Services Commission (IASC) has turned down an application by Qantas to share codes with Cathay Pacific on flights between Australia and Hong Kong.

The IASC found that although such an arrangement would result in some consumer benefits “in terms of improved connectivity and potentially some increase in route options”, it would also be “likely to entrench and expand the market position of Qantas and Cathay Pacific, to the detriment of Virgin Australia’s competitive position and the position of any potential future entrants on the route”.

Both Virgin Australia and the ACCC made submissions to the IASC on the matter.

Qantas and Cathay had initially proposed to share codes on flights operated by Qantas on the Hong Kong route from 31 March 2019.

Qantas flies nonstop from Brisbane, Melbourne and Sydney to Hong Kong, using a variety of aircraft, including A330s, A380s and B787 Dreamliners. Cathay Pacific flies from Hong Kong to Australia’s four major gateways: Brisbane, Melbourne, Perth and Sydney. Together, they constitute a formidable force on the route.

Cathay Pacific A350-900

The IASC found that any weakening of competition on the route might easily lead to “an increase in prices and/or a reduction in other benefits to consumers”.

The IASC stated: “Qantas identifies the easier marketing of complex itineraries on a single airline code as a key benefit to the public that would result from the proposed variation. The Commission has found, however, that Qantas already has the ability to code share on a range of Cathay Pacific flights beyond Hong Kong, connecting to the same aircraft that the application seeks approval for.

“It is, therefore, already possible for Qantas to offer a single airline code on these aircraft through Hong Kong to Australia. Codeshare and interline arrangements between Qantas and Cathay Pacific are already in place giving Cathay Pacific the ability to offer through-journey connectivity to passengers from Australia to various destinations via Hong Kong and vice versa. The marketing of complex itineraries is not dependent on the approval of this application.

“The Commission also found that without the proposed variation, Qantas is able, under codeshare arrangements currently in place, to market its code on a range of services operated by Cathay Pacific and Cathay Dragon to various destinations in Asia, including cities in India, Vietnam, and Korea.

“The Commission finds that the likely public benefits of the variation are substantially outweighed by the likely public detriment that would follow from the proposed variation.

Qantas Boeing 787-9 Dreamliner

“For this reason, the Commission is satisfied that variation would not be of benefit to the public, within the meaning of the Act. Accordingly, the Commission must not make a decision approving the variation.”

Written by Peter Needham

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