Australia rejects Qantas-Cathay codeshare

May 31st 2019

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Draft determination said various benefits would be ‘substantially’ outweighed by net detriment. Read More »

A 4.5 month regulatory proceeding about codeshares has come to an end with Australia’s International Air Services Commission (IASC) making a draft determination to reject a proposed codeshare between Qantas and Cathay Pacific.

The proposed codeshare would have been on overlapping Hong Kong-Australia flights. It would only have been available when sold as part of a connecting journey to lessen competitive impacts by selling overlapping trunk routes from Hong Kong to Brisbane, Melbourne and Sydney.

“The likely public benefits of the variation are substantially outweighed by the likely public detriment that would follow,” the IASC wrote.

IASC was concerned the codeshare would “entrench” the position of Cathay and Qantas to the detriment of Virgin Australia. IASC warned Virgin Australia could be “materially weakened”.

IASC noted Qantas did not offer to grow Australia-Hong Kong flying and Cathay would be unable to do so because it already uses all of its capacity entitlements to major Australian cities. Cathay has, however, recently submitted schedule changes that will use the larger A350-1000 instead of the A350-900 on some flights.

Qantas did claim there would be consumer benefits through loyalty programmes, but IASC said such a change was an “internal administrative decision” that could be done independent of a codeshare.

IASC also agreed with concerns of the Australian Competition and Consumer Commission that there could be reduced competition intensity even without explicit collusion.