Australia's Competition and Consumer Commission (ACCC) has approved an extension of the 1995 joint services agreement between Qantas and British Airways. Its decision assures a future for the alliance between these oneworld partners and convinced BA it could safely sell its Qantas stake.
The ACCC concludes that overall benefits from the alliance outweigh its anti-competitive effects, even though it allows Qantas and BA to co-ordinate prices and capacity on the busy Kangaroo route between Australia and the UK. Virgin Atlantic, which plans to launch competing service in December, calls the decision "perverse" and warns that it is reviewing possible grounds for an appeal. The ACCC says it is "puzzled" by Virgin's objections.
The ACCC's biggest concern is that Qantas and BA carry 70% of all Australian business travellers to the UK, and 60% of all business traffic between the two nations. Moreover, slot constraints at Heathrow reinforce this dominance, creating a barrier for entry by competitors.
Conversely, the ACCC notes that business passengers are only a small part of total Australia-UK traffic, and overall competition is intense thanks to such carriers as Singapore Airlines, Thai, and Emirates, so that cost savings from the alliance are likely to "end up in the hands of consumers".
The ACCC stresses that the Qantas-BA alliance raises fewer concerns than the proposed Qantas alliance with Air New Zealand (ANZ). Appeals against the rejection of that proposal have failed. Qantas and ANZ control 90% of the Tasman market, the ACCC claims, while Qantas-BA together control 40% of the Australia-UK market and only 30% of traffic between Australia and South-East Asia.
Geoff Dixon, Qantas chief executive, concedes there has been some tension with BA over Qantas adding six new flights at London's Heathrow airport. But Dixon insists that the two carriers will remain close commercial partners despite this and BA's sale of its Qantas stake.
Qantas and BA sought permanent approval for their joint services agreement. As before, the ACCC is only approving it for another five years.
Source: Airline Business
