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Cosy Qantas Deal With South Africa Passes Muster – Barely

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QANTAS will retain its cosy duopoly on the lucrative Australia to South Africa route, after authorities issued a two-year extension to the airline’s code-share agreement with South Africa Airways.

But the International Air Services Commission (IASC) came close to denying the application, admitting it would have blocked it had Virgin Blue not signalled that it planned to fly to South Africa.

The Australian Competition and Consumer Commission (ACCC) maintains the code share reduces incentives for Qantas and South African Airways (SAA) to compete on both price and services on the route.

The two airlines are the only ones to fly directly between the countries. They control about 71 per cent of the market. Their main competitor, Singapore Airlines, has about 12 per cent.

The competition regulator fears that Qantas’s plans to increase flights on the route over the next six months will mean it will tighten its grip on the market before Virgin enters the fray.

Virgin’s long-haul carrier, V Australia, wants to begin flying to South Africa by October, although industry insiders are sceptical about the timing. It does not plan to make its first flight between Sydney and Los Angeles until February 28 – three months later than scheduled.

The ACCC said the only competition came from carriers which flew indirect between the two continents via their airport hubs. The additional travel time ranges from seven to 16 hours.

The International Air Services Commission has repeatedly raised concerns over the years about “limited competition” and “continuing high fares” on the route.

But in its latest decision, the commission said it was heartened by both Qantas’s plans to increase flights on the route and Virgin’s intentions.

Under the code share, Qantas buys blocks of 100 seats on each SAA flight while the South Africans purchase up to 160 seats on each of the Australian carrier’s aircraft.

Qantas flies five Boeing 747-400 return trips between Sydney and Johannesburg each week and SAA flies five A340s between Perth and South Africa’s largest city. Qantas will add a sixth service next Tuesday and a seventh by the middle of next year.

A Singapore Airlines spokeswoman said the South Africa route was yet another example of consumers paying more because of a lack of competition.

“Singapore Airlines offers fares on the route that are lower than the national carrier’s despite the fact that we fly via Singapore … A lack of competition on the route is keeping the fares unreasonably high,” she said yesterday.

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