Aviation

Final nail in the coffin for proposed Qantas-Cathay Pacific codeshare expansion

Huntley Mitchell

Huntley Mitchell

The fight by Qantas and Cathay Pacific to get their proposed codeshare expansion over the line is finally over, with the International Air Services Commission (IASC) handing down its final decision.

After the commission initially denied the proposed codeshare expansion between the two airlines with a draft ruling in May, Qantas suggested in a June submission that the IASC should permit the deal and monitor the outcome.

“Qantas stated that the commission would be able to review the codeshare in November 2019 (i.e.12 months before the expiry of the determination) as part of the process of renewing the determination,” the IASC said in its final ruling.

“This would allow for five months of implementation of the code share before the commission is able to review the arrangement.”

Under the proposed agreement, Qantas wanted to add its code to an additional 19 one-way routes operated by Cathay/Cathay Dragon from Hong Kong to India, Japan, South Korea and Sri Lanka.

Qantas planned to also add its code to select Cathay services from Hong Kong to Sydney, Melbourne and Brisbane, where passengers are connecting to a Qantas Australian domestic service.

In return, Cathay, would add its code to an additional 32 one-way domestic Australian routes operated by Qantas.

The airline wanted to also add its code to select Qantas services from Sydney, Melbourne and Brisbane to Hong Kong, where passengers are connecting to a Cathay/Cathay Dragon service to another destination in Asia.

Qantas was seeking approval from the IASC for Cathay to the last part of the deal, and did not require approval from to engage in the other three elements of the proposed expanded codeshare arrangement.

The proposed codeshare expansion has been strongly opposed by Virgin Australia and the ACCC ever since it was announced.

In opposing Qantas’ proposal to permit the proposed variation subject to monitoring and review, Virgin Australia in its July submission stated that if the approval was granted, “Qantas would automatically receive the benefit of the presumption in favour of renewal.”

The IASC concluded yesterday that Qantas’ suggestion to permit the codeshare subject to monitoring and review was “not a viable approach”.

“For monitoring to be effective, the commission should be able to identify the potential harms resulting from the variation in a timely way and prevent such harms from occurring or, at least, to substantially mitigate the harms,” it said.

“In this instance, it is not apparent how the commission could monitor the risks identified in this decision in a timely way, within the short period of five months before a review is undertaken.

“To the extent that the monitoring relied upon analysis of changing market share and competitive incentives, reliable information may not be available in a timely way to the commission.

The IASC said there was also a risk “that the harms resulting from the implementation of the variation would not be reversible by the time they were identified such that the route would end up being serviced by only two carriers under a codeshare arrangement”.

A Qantas spokesperson said the airline was “disappointed” with the IASC’s final decision.

“The codeshare has already delivered great benefits for our customers, and expanding it would create even more options for travellers and improve opportunities for frequent flyers,” the spokesperson told Travel Weekly.

“We are reviewing the decision and are considering our next steps.”

In a statement to Travel Weekly, a Cathay Pacific spokesperson said: “We believe that an expanded codeshare would create more options for travellers and improve opportunities for frequent flyers. We will consider our next course of action.”

Virgin Australia has welcomed the IASC’s final decision, with a spokesperson telling Travel Weekly that “it will ensure that there is no distortion in the competitive landscape on the Australia-Hong Kong route”.

“The proposed codeshare would have constrained the ability for other players to effectively compete on this route, which would have had a negative flow-on effect for our customers, as well as impacting tourism and trade,” the spokesperson said.

“Hong Kong remains an important part of our international network and we will continue to offer an exceptional product and service for the travelling public.”

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