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Virgin Australia: new Air Niugini-Qantas codeshare to jeopardise our flights

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Virgin Australia says that approval for Air Niugini and Qantas to expand their codeshare arrangements on Australia-Papua New Guinea (PNG) routes would jeopardise the viability of its own Brisbane to Port Moresby flights.

The airline has told Australia’s International Air Services Commission (IASC) it held strong concerns regarding the proposed continuation and expansion of Air Niugini and Qantas’s codesharing arrangements on Australia-Papua New Guinea routes.

“If allowed to continue, the codeshare services have the potential to jeopardise Virgin Australia’s ability to maintain a presence in the market, which would reduce choices available to consumers and limit scope to support the growth of Australian tourism and trade,” Virgin Australia said.

Australia’s second largest airline was responding to Air Niugini and Qantas’s application to the IASC to continue codesharing on the Brisbane-Port Moresby and Sydney-Port Moresby route, as well as extend the arrangement to Cairns-Port Moresby and Townsville Port Moresby.

Currently, Air Niugini, Qantas and Virgin Australia fly between Brisbane and Port Moresby, while Air Niugini is the only carrier offering nonstop services from Cairns, Sydney and Townsville to PNG, Australia Aviation reports.

In October 2016, the IASC partially approved Qantas and Air Niugini’s request for an expanded codeshare agreement on Australia-Papua New Guinea routes, allowing the pair to codeshare on Brisbane-Port Moresby and Sydney-Port Moresby, despite the vigorous opposition of Virgin Australia at the time.

Qantas lodged its application to expand the codesharing arrangement with Air Niugini in February 2018, arguing it offered “maximisation of the public benefit“.

And Virgin Australia has again come out strongly opposing the application, arguing the performance of its Brisbane-Port Moresby service during the past 12 months suggested the existing Air Niugini and Qantas codesharing had “distorted the competitive landscape by enabling the two largest carriers to strengthen their market dominance”.

As a consequence, in February the airline cut its schedule on the route to five flights a week, from six flights a week previously.

“The commercial performance of Virgin Australia’s services on the PNG route deteriorated dramatically in 2017, following the commencement of parallel code share services by Qantas and Air Niugini between Brisbane and Port Moresby,” Virgin Australia said.

“This deterioration forced us to review our capacity in the market, which eventuated in the removal of our Sunday service.

“Despite the fact that the average fares we offered in 2017 were significantly cheaper than those offered by our competitors, we were unable to attract sufficient passengers to achieve a reasonable load factor.”

Virgin Australia said its average load factors on the Brisbane-Port Moresby route fell from 48.6 per cent in 2016 to 35.0 per cent in 2017.

By contrast, Air Niugini improved its average load factors 2.1 percentage points to 54.3 per cent, while Qantas achieved a 7.2 percentage point increase to 57.6 per cent.

Virgin Australia said it has become “very challenging to compete effectively on the route” and its options to improve the commercial performance of those flights were “extremely limited”.

“With outbound travel to PNG dominated by business traffic, further reductions in our schedule would severely damage our selling proposition with the business traveller, curbing our ability to both retain and win corporate contracts on the route,” Virgin Australia said.

“Without the ability to increase our loads, it will become very difficult for us to maintain our presence in the Brisbane-Port Moresby market in the future.

Air Niugini said in its submission the codeshare arrangement would continue to “foster greater public benefit by offering passenger and freight customers a wider range of products” on the Brisbane and Sydney routes than either carrier could offer separately.

It said the proposed Qantas codeshare on Air Niugini’s Cairns and Townsville flights would “assist the viability of these services”.

The PNG carrier said it would have to “carefully review the ongoing sustainability” of its Cairns and Townsville operation, as well as consider reducing services or withdrawing completely from Sydney and downgaugiqg Brisbane from widebody aircraft to narrowbody equipment should the IASC not approve the application.

“Air Niugini considers that there are strong grounds for the IASC to grant the proposed variation in full, on the basis that it is likely to result in significant public benefits, relative to the likely situation if the proposed variation is not granted,” Air Niugini said.

Qantas’s submission noted it and Air Niugini both independently priced and sold services on the PNG route, with both carriers operating their own yield management systems as part of the free sale codeshare arrangement.

Townsville Airport, the Townsville City Council and local business groups have come out in support of the proposed codeshare.

It is not the first time of late that an Australian airline has threatened to withdraw from a route should a regulator not decide in its favour – last week Qantas said it could be forced to withdraw from Dallas/Fort Worth if the US Department of Transport withheld approval of an expanded alliance with American Airlines on trans-Pacific routes.