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JUNE 2019


Qantas to appeal rejection of extended code share with Cathay Pacific

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June 1st 2019

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Australia has rejected an application from Qantas Airways and Cathay Pacific Airways to extend their codeshare arrangements, but the Australian airline’s CEO, Alan Joyce, said this month the International Air Services Commission (IASC) has it wrong. Read More »

“We don’t think it is a good decision. We are going to appeal it,” he said, arguing the code share would have significant benefits for air travelers. “We will go back to the IASC and make sure we are very clear on what we believe those public benefits are.”

The draft IASC ruling said that to allow Cathay Pacific to place its CX airline code on 35 Qantas-operated return flights a week from Brisbane, Melbourne and Sydney to Hong Kong was likely to “entrench and expand the market position” of the two airlines to the detriment of Virgin Australia’s competitive position and the position of any potential future entrants on the route.

“If this occurs, it is likely to weaken competition on the route, leading to an increase in prices and/or a reduction in other benefits to consumers,” the draft decision said. “The Commission finds the likely public benefits of the variation are substantially outweighed by the likely public detriment that would follow from the proposed aviation.”

Qantas has argued the code share agreement was pro-competitive and designed to offer passengers more choice on a greater number of city pairs with no adverse impact on the competitive dynamics on point-to-point routes between Australia and Hong Kong.

The IASC disagreed and said in its draft decision the proposed code share was likely to lead to a market structure which made it more difficult for Virgin Australia to compete and also would raise barriers for new entrants on the route. “It is likely Virgin will have a weakened, and perhaps materially weakened, position that may make it difficult for Virgin to sustain its operations,” the commission wrote.

Cathay and Qantas dominate the Australia-Hong Kong market with close to 90% market share in seats. Virgin Australia, with its daily nonstop flights from Melbourne and Sydney to Hong Kong, is the only other operator in the market. It had vigorously opposed the application.

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