Qantas, South African Airways pact receives draft approval to end of 2014.
The International Air Services Commission is proposing to allocate Qantas seven services per week on the South Africa route for the next five years – but will only permit South African Airways to code share on the flights until 31 December 2014.
A draft determination to be issued today will state that the Commission is concerned that the “duopoly environment” on the South Africa route greatly limits the intensity of competition, due to the basis on which each carrier charges the other for its block of seats, the weak competitive constraint imposed by third country carriers, and the knowledge by both Qantas and SAA that if they discount fares too aggressively it might destabilise the arrangement.
“In an environment in which the carriers are able to routinely achieve high load factors, there is little pressure on either carrier to offer fares materially below the monopoly price,” the document states.
Over the next two years, the IASC says that without the codeshare each airline is likely to operate their respective routes as a “monopoly provider of a direct service,” but in the period beyond 2014 the Commission considers that there is “a greater prospect of two carriers offering parallel direct services”.
QF had sought approval for the code share until 31 Mar 2016, but “on the basis of the public and confidential information available to it, the Commission is not satisfied that the code share would be of benefit to the public beyond 2014,” the document states.
More information in today’s Travel Daily.