Qantas has criticised the airline regulatory body for refusing to grant long term approval for its codeshare with South African Airways (SAA) and raised concerns that the arrangement may be rejected altogether at the end of the year.
In a seven-page public submission calling for a five-year extension to the codeshare, Qantas accused the International Air Services Commission (IASC) of ignoring the competitive threat of third country carriers, underestimating the likelihood that direct flights may be axed if the codeshare is withdrawn and for failing to understand the market dynamics.
South African Airways has also written to the IASC arguing that while it will accept the timeframe – albeit reluctantly – a requirement to add a seventh weekly flight between Perth and Johannesburg was potentially damaging.
The submissions follow a draft decision by the IASC in November to only grant approval until December 31.
“We are concerned with the commission’s indication that approval of the codeshare will not extend beyond the end of 2012,” wrote Tony Wheelens, Qantas general group manager Government and Industry Affairs.
In a litany of objections to the draft ruling, Qantas also said the IASC “did not place sufficient weight” on the competition that exists between the codeshare partners.
Seats are marketed and priced separately and “do not create market circumstances that are detrimental to the interests of consumers or competing airlines”, it said.
Qantas argued that the IASC demonstrated “apparent ambivalence” to the prospect of it, or SAA reducing or withdrawing entirely from the route, an approach “that concerns us deeply”, Wheelens said.
“In the event a monopoly is established, the incumbent carrier would be free to reduce capacity without intervention by the commission – the very issue under consideration.”
Qantas also insisted that the withdrawal of V Australia confirmed that the route could only support a small number of direct carriers and that codesharing is “critically important to maintaining competition on the route”.
“There is no evidence whatsoever to support the Commission’s assertion that the codeshare arrangements may have contributed to V Australia’s losses and to its eventual withdrawal,” the Qantas submission said.
South African Airways, in its submission, revealed that a small profit being generated on its six weekly Perth services was being “heavily negated” by losses on the Qantas-operated Sydney flights.
“Adding the 7th flight very well may lower our overall load factors, increase our costs further and as a consequence cause the Perth route into a loss making situation,” the carrier said.
A final ruling by the IASC is expected by the end of March.
