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Qantas ups ante for Cathay codeshare
March 22nd 2019
Qantas dismisses anti-competitive concerns by saying Virgin Australia should have a ‘more compelling proposition’. Read More »
Qantas is continuing to urge Australian authorities to approve a codeshare with Cathay Pacific that the competition watchdog and Virgin Australia consider to be anti-competitive.
The proposed codeshare would see Qantas and Cathay codeshare on some overlapping Australia-Hong Kong flights but only sell them in conjunction with a connection. By adding a domestic Australia or beyond Hong Kong connection, Qantas argues it and Cathay would expand options and still be competitors on trunk flights between Hong Kong and Brisbane, Melbourne, and Sydney.
Qantas says the proposal is “fundamentally pro-competitive because of the delivery of clearly increased schedule and itinerary choice for consumers”. Qantas’ purported main aim is to improve connecting options between Australia and South Asia. Singapore Airlines has a 27% share of the market from Australia to five major Indian cities. But as Orient Aviation previously flagged, the Cathay codeshares would only improve Australia-India travel in one direction. This cannot be the “clearly increased…choice” Qantas claims.
Share of market from Australia to 5 Indian cities (Mumbai, Delhi, Chennai, Kolkata and Bangalore)
Source: Orient Aviation and Qantas
Qantas has been providing a drip feed of information about the proposal. Intentionally or not, this appears to have confused the regulator and other parties. While Qantas first claimed the focus was on the Australia-India market with additional benefits in Japan, Korea and Southeast Asia, Qantas now tells the International Air Services Commission (IASC) that the partnership would better enable Cathay to sell Australia-North America tickets, where it is a small sixth freedom competitor. Cathay has not made any submission to the IASC.
There were concerns the codeshare could be anti-competitive by giving Qantas and Cathay vast majority control of the Australia-Hong Kong. Qantas rejects “any suggestion that there will be any direct or indirect coordination of price or capacity decisions between Qantas and Cathay”.
An indirect consequence of selling each other’s flights with connections is a decrease in O&D sales. O&D traffic comprises the majority of the market, with Qantas saying 27% of passengers on its Australia-Hong Kong flight connect while 21% on Virgin do. It did not give figures for Cathay.
Qantas sought to squash concerns by first rejecting anti-competitive claims and second denying Virgin Australia’s view that its own Hong Kong flights could be jeopardised. Qantas says Virgin instead of limiting cooperation at other airlines should instead focus on developing its own partnerships. Qantas says this would help Virgin reduce its reliance on local Hong Kong-Australia traffic.
For Japan and Korea sales, Qantas notes that Virgin’s alliance with Singapore Airlines takes precedence over Virgin’s alliance with the HNA Group. A deeper partnership with HNA could help Virgin sell more beyond Hong Kong travel options, Qantas infers. “It appears from publicly available information that the arrangements could be more extensively utilised to offer a more compelling proposition,” Qantas says.
Yet just as Qantas wants a beyond-Hong Kong partner for multiple regions, HNA links to Japan and Korea would probably not be sufficient to deliver a material impact to Virgin, even if there was schedule alignment.
Qantas also flags there will be unspecified frequent flyer programme improvements, but regulators generally consider this a low benefit.
Connection flows from South Asia to Australia. Qantas being able to codeshare on earlier Cathay flights will significantly reduce connection times.
Source: Orient Aviation
Connection flows from Australia to South Asia. Qantas flights already connect to Cathay flights. Cathay flights do not enable earlier connections.
Source: Orient Aviation
