Qantas/Virgin playground fight over Japan – ACCC says they should share like good little airlines

Scrapping in the playground

Australia’s two international airlines have been battling to gain two landing slots at Haneda Airport in Tokyo. These slots are not easy to come by. Qantas has been man-spreading itself over the two slots, while, Virgin, has politely asked if it could have one, please?

ACCC

Well because they couldn’t play nice with each other in the playground, the Australian Competition and Consumer Commission (ACCC) has weighed in, offering their advice to Australia’s International Air Services Commission. The ACCC has opined that Qantas is a bully they should have one slot each.

Meany Qantas, have questioned why Virgin should get one slot when they can’t even make a profit on everything else they do.

The ACCC (supported by Tourism Australia) quite rightly observes that, despite Virgin not flying to Japan currently, having a bit of capitalist competition between two Australian carriers on the route to Tokyo might be in the best interests of Australian consumers.

Japan is a booming destination for Australians at the moment.

“Virgin Australia’s behaviour would likely elicit a competitive response from the other airlines operating between Australia and Japan, to the benefit of consumers through lower prices and improved service.”

ACCC Report

What will they do if who gets what?

Well, Virgin is promising to start a daily flight from Brisbane as of March 19, 2020, using an Airbus A330-200.

Qantas will use the two slots to increase frequency and move their Tokyo arrival airport from Narita to Haneda. The advantage is that then both it’s Melbourne and Sydney flights would then be to Haneda which is 20kms from Tokyo, significantly closer than Narita which is 70kms out of Tokyo.

Tourism Australia has also called for Virgin Australia to be given one of the landing slots in the belief it would result in cheaper airfares.

Virgin’s new chief executive Paul Scurrah is in the process of reviewing the financially troubled airline’s network and fleet and has flagged the possibility of withdrawing from some markets.

What Qantas says:

“The ability of Virgin Australia to use the capacity on an ongoing and sustainable basis is a critical consideration for the Commission that has not been adequately addressed, … Allocation of two frequencies per day to Qantas, as requested, will deliver the greatest benefit to the public and is the only no-risk option to launch and utilise scarce and strategically valuable slots.”

Qantas can be such meanies sometimes – well it does (along with its Oneworld partner JAL) have a 90 per cent market share of the routes. Talk about market dominance!

What Virgin Australia does:

Cunningly, they have signed a partnership (read code-share) with ANA (All Nippon Airways) – who just happens to be Japan’s biggest airline! This will see them codeshare flights Australa–Japan and on connecting domestic flights. ANA currently operates Tokyo–Sydney flights, and a flight to Perth, which is the only direct service.

2PAXfly Takeout

While I can understand Qantas wanting to tidy up its Japanese destinations, they also want to tie up the Tokyo route – to Virgin’s exclusion. On the other hand, Virgin is hoping for a stake in a market it has not previously participated in.

On balance, I think it is a ‘well done ACCC and Tourism Australia’ moment.

This looks like a textbook case of potential anti-competitive behaviour by Qantas. It looks like they want to re-enforce their position while effectively blocking competition.

Am I being unfair?