BALI: Qantas/Jetstar and Virgin Australia in stouch over extra flights from Australia to the island of Bali in Indonesia

Australia and Indonesia have a bilateral air rights agreement, and additional landing rights have become available. It is the Australian International Air Services Commission (IASC), a government instrumentality, that is the decision maker here. It gets to decide which of the airlines gets what proportion of the roughly 2,500 weekly seats up for grabs.

Qantas, Jetstar and Virgin Australia are only three of a total of eight airlines that fly between Australia and Indonesia. Other airlines include Garuda, Malindo Air and Air Asia,

Who should get what share?

Obviously, Qantas/Jetstar thinks it should get most, if not all because they offer ‘cheaper’ seats – between 14% and 68% cheaper, in fact, they argue (average ~37%).

On the other hand, according to Virgin Australia, awarding Qantas/Jetstar more flights would just entrench their dominance of the market:

‘Currently, Virgin Australia faces a competitive disadvantage in major capital cities such as Sydney, Melbourne, Brisbane, and Perth, and it currently holds less than 20 per cent of the total capacity between Australia and Indonesia.’

‘If the additional bilateral capacity were to be allocated to the Qantas Group, Virgin Australia’s share would further decrease to 18 per cent. Even if Virgin Australia’s application is successful, its overall bilateral capacity share would only increase from less than 20 per cent to 27 per cent, which remains significantly lower than its largest competitor.’

Virgin Australia’s Submission

The Competitions Commission has weighed in

Now the Australian Competition and Consumer Commission (ACCC) has also made a submission to the IASC, which, put simply, supports Virgin Australia over Qantas/Jetstar.

Qantas/Jetstar would like to take 2,320 of the seats thankyou very much. It wants to run flights from Cairns to Denpasar via Melbourne, and Adelaide to Denapsar via Perth. On the other hand, Virgin has asked for all of the 2,464 seats available weekly for use on flights from Adelaide and the Gold Coast to Denpasar via Perth.

Their reasoning, as is their brief is about competition. It suggests that Jetstar is already the biggest supplier of capacity between Australian ports and Bali in 2023. Add its capacity with that of Qantas, and together they run 55% of available seats, compared to 15% for Virgin Australia.

‘The ACCC anticipates that this new competition would likely result in better outcomes for passengers through lower prices and improved services.’

Australian Competition and Consumer Commission

Perth to Denpasar is currently monopolised by Jetstar with three services a week. Adding Virgin would take away the monopoly, and introduce some competition. Cairns to Denpasar is also currently a Jetstar monopoly. Additional rights would allow it to take this to daily. Jetstar also has 70% of the seats between Melbourne and Denpasar.

The ACCC sees the added competition on these and other routes would result in ‘better outcomes for passengers through lower prices and improved services.’

Even more support

It’s not just the ACCC that is supporting Virgin. The Flight Attendants Association of Australia, Queensland Airport and the Transport Workers Union, have also given their support in their respective submissions.

2PAXfly Takeout

Capacity rights and market dominence is a bit of a chicken and egg argument. You can’t be dominant unless you have the rights, and you can’t have the rights unless you are dominent – argues Qantas/Jetstar.

I think I am on the ACCCs side. Threatening the dominance of Qantas/Jetstar is the way to preserve or increase competition, and its competitiveness that will keep the prices down.

Notice of Submissions to the IASC closed on 18 January, so now comes the hard part – making a decision. There is no publicly available timetable for that.