QANTAS has won regulatory approval for its code-share alliance with South African Airways on flights between Australia and Johannesburg to be extended for two years.
However, the ruling by the International Air Services Commission falls short of Qantas’s request for the alliance to be approved until March 2016.
Under conditions imposed by the regulator, the two airlines will have to operate at least 13 flights a week between Australia and South Africa.
The alliance has long been a bone of contention because Qantas and South African Airways are the only airlines that have direct flights between the two countries. Rivals, such as Singapore Airlines, which offer flights to South Africa via their home ports provide the only competition.
The regulator has previously raised concerns about high fares on the route.
In its decision, released yesterday, the commission said the code-share deal was not likely to ”remove incentives for competition” in the next two years.
However, it said the deal had the ”potential to delay competition” after 2014 because it would reduce incentives for South African Airways to introduce its own services between Sydney and Johannesburg. Likewise, Qantas would be discouraged from flying its own aircraft between Perth and Johannesburg.
The International Air Services Commissioner also said a code-share deal was likely to deter other airlines from offering direct services on the route in the longer term.
”The commission is concerned that [the code-share] may deter or delay the introduction of competing services, particularly on the Sydney route, and increase barriers to entry,” it said.
”The commission is not satisfied that the code share would be of benefit to the public beyond 2014.” The code-share agreement involves South African Airways pre-purchasing a fixed block of seats on Qantas’s services between Sydney and Johannesburg.
The price paid for the seats is determined by the equivalent percentage of Qantas’s total costs of a flight. South African Airways carries a loss if it does not sell enough seats to cover the cost of the pre-purchased block of seats.
The same applies to the blocks of seats Qantas buys from South African Airways on its flights between Perth and Johannesburg. Qantas does not need regulatory approval for the pair’s code-share arrangement for flights on that route.
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