Cathay Pacific / Qantas code share rejected

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This topic contains 9 replies, has 6 voices, and was last updated by  Ahmad 5 Jun 2019
at 09:31
.

Viewing 10 posts - 1 through 10 (of 10 total)

  • cwoodward
    Participant

    Australia‘s International Air Services Commission has rejected Qantas‘ application to enable Cathay Pacific to market and place its code on selected Qantas flights between Australia and Hong Kong.
    A rare win for fare paying passengers perhaps?

    2 users thanked author for this post.

    EU_Flyer
    Participant

    QF and CX cover the majority of the direct AUS-HKG market. Had this been allowed, it would have crushed, for example, Virgin Australia and led to higher fares.

    A rare win for the passenger and the underdog!

    1 user thanked author for this post.

    BrotherJim
    Participant

    Virgin Australia is a niche player on medium/long haul flights especially to Hong Kong. This deal would have made little difference to them or fares in general. Now if the offered or could offer the number of flights say Qantas operates to Hong Kong then there may be a point to be made.


    EU_Flyer
    Participant

    Virgin Australia is a niche player on medium/long haul flights especially to Hong Kong. This deal would have made little difference to them or fares in general. Now if the offered or could offer the number of flights say Qantas operates to Hong Kong then there may be a point to be made.

    Please explain how the two biggest players in a particular market entering into a commercial agreement to sell seats on each other’s flights rather than compete would not impact a niche player like Virgin? It would simply give Cathay and Qantas more options at the expense of others surely?


    esselle
    Participant

    Interesting. They would still be flying the same number of seats, so the only impact on Virgin would be if they started selling seats at lower prices than they do currently, thus tempting would be Virgin passengers to fly with them.

    Except they could do that even without a codeshare……..


    Ahmad
    Participant

    Virgin Australia is a niche player on medium/long haul flights especially to Hong Kong. This deal would have made little difference to them or fares in general. Now if the offered or could offer the number of flights say Qantas operates to Hong Kong then there may be a point to be made.

    Please explain how the two biggest players in a particular market entering into a commercial agreement to sell seats on each other’s flights rather than compete would not impact a niche player like Virgin? It would simply give Cathay and Qantas more options at the expense of others surely?

    I am seriously interested in the perceived anti-competitiveness of airline code-share arrangements and will be grateful if someone can explain how this is so. The only way I can think of is to block seats and create an artificial shortage. But would that be economically feasible? Also as @essele points out, will this increase their market share in real terms?


    AMcWhirter
    Participant

    And news out today refers to another Qantas code-share.

    If approved it would be with AA between Brisbane, Chicago and San Francisco.

    https://thenewdaily.com.au/life/travel/2019/06/04/qantas-non-stop-chicago/


    EU_Flyer
    Participant

    I am seriously interested in the perceived anti-competitiveness of airline code-share arrangements and will be grateful if someone can explain how this is so. The only way I can think of is to block seats and create an artificial shortage. But would that be economically feasible? Also as @essele points out, will this increase their market share in real terms?

    I am by no means an expert, but here goes.

    By code-sharing Qantas would place its code on every Cathay flight ex Australia and vv. The volume of seats , and the frequency at which those flights are available, for each carrier to sell therefore increases significantly, especially for QF as the carrier operating less actual services. Qantas could choose to sell those seats in whatever way it wants and at whatever price, especially in economy where deep discounting is common to sell empty seats.

    Virgin can’t compete with that unless it also grows the number of seats, and frequency of flights, available to sell. It won’t / can’t do that with direct services (vs the current SQ arrangement via SIN). So suddenly Qantas becomes a lot more attractive to corporate travel buyers as they can offer more seats and more frequency per day. Same goes for Cathay. Full service airline live/breath off corporate accounts covering all classes of travel.

    So Virgin has to try even harder to score those corporate accounts off Qantas/Cathay’s new marriage of convenience. By lowering price – which isn’t sustainable? After a while, Virgin get squeezed and are forced to pull out.

    Code-shares and JVs only work where there is a competitive market. Eg, Trans Pacific where QF, DL, VS, UA, AA and even NZ, Hawaiian and Air Fiji service that market. Same went for AUS – EU with over 12 carriers (from AUS, UK, Asia and Gulf States) offering one stop options from Australia to Europe via their hubs. So the BA/QF worked for years in that context as does the QF/EK arrangement. They’re counter balanced by heavyweights like SQ, QR and all the Asian carriers.

    Hope this helps…

    4 users thanked author for this post.

    cwoodward
    Participant

    Re AMWhirters post

    Qantas and AA last year proposed a huge code share arrangement on all flights to and from the US to AU. This was rejected by the regulator,appealed and rejected a second time thusI suspect that this attempt will also be rejected.
    EUflyer makes the point well that code shares do adversely effect smaller players and significantly distort the market in favor of the dominant codeshare partners which is of course exactly the intention.

    Cathay and Air NZ (members of different alliances) codeshare on the HK- Auckland route is so dominant that it squeezed HK Airlines off of the route. The code share now enjoys 100% domination on all direct HK -NZ routes. This cannot be a good situation for customers…….don’t took for cheap fares on this route!
    The code share agreement is up for renewal this year and there are indications that the NZ now labour government will not renew it.


    Ahmad
    Participant

    Thank you @EUFlyer. I was under the misapprehension that codeshares only meant access to some inventory on every flight with limited flexibility on the fare that can be charged. It seems I am behind the times as what you describe is effectively unconditional access to the whole inventory of the codeshare partner. If this is so, it would certainly amount to an unhealthy increase in the market share which can potentially squeeze out new entrants or small players.

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