is criticizing assumptions made by Australian regulators about future competition on Australia-South Africa routes after the carrier was denied a long-term extension for its code-share with South African Airways (SAA).
Qantas and SAA had asked Australia’s International Air Services Commission (IASC) for their code-share to be extended to March 31, 2016, but last month the IASC issued a draft ruling that the code-share should only be extended to Dec. 31, 2014. The IASC estimates that there is likely to be enough potential for new competition by then that the code-share would not be needed to ensure service levels.
In a response sent this week, Qantas tells the IASC that while it accepts the ruling, it has “serious concerns” with the supporting arguments made by the regulator.
The code-share deal sees Qantas flying daily between Sydney and Johannesburg and SAA operating between Perth and Johannesburg. Each carrier sells a “hard block” of 40% of its seats to the other. No other carriers serve these routes with direct flights.
The airlines argue that this arrangement is needed to maintain daily service on these two routes, as there is not enough demand to sustain non-code-share flights. However, the IASC is skeptical that this would be true beyond 2014, holding that by then demand will be strong enough to support two carriers. In that case, the Qantas-SAA arrangement would be anti-competitive.
However, in its latest submission, Qantas refutes the assumptions on growth trends. “Qantas does not believe that the average annual growth rates on the route will justify another airline offering a direct parallel service at the frequency that would enable it to effectively compete,” the carrier says.
The block of seats each airline has on the other’s service helps to maintain competition, since they are marketed independently, Qantas says. It also boosts demand because marketing is done by the “home carrier” on each end of the route.
Qantas says that in some of its statements, the IASC “appears to almost willfully misunderstand the circumstances of the code-share and the commercial realities of managing a committed inventory block.”