Air New Zealand, which is locked in a fierce battle with Qantas Airways on two fronts, is seeking to delay a co-ordinated increase in capacity from Qantas and American Airlines on the trans-Pacific route beyond the planned peak season start in December.
Qantas has placed pressure on Air NZ by announcing the launch of Jetstar services to regional cities in New Zealand and through adeeper alliance with American.
The alliance will lead to Qantas resuming services on the Sydney-San Francisco route and American adding daily flights from Sydney to Los Angeles, resulting in a 9 per cent increase in capacity between Australia and the mainland United States. The partners have also flagged plans to fly from Auckland to Los Angeles as early as next year, in a move that would break Air NZ’s highly lucrative monopoly on flights between New Zealand and the mainland US.
NO COMPELLING EVIDENCE
Air NZ also said Qantas and American had not provided compelling evidence that the deeper alliance would not harm competition, particularly since they would be increasing co-operation on the Sydney-Dallas route not operated by any other airlines.
In response, Qantas and American told the ACCC they believed Air NZ’s arguments were invalid.
“Air NZ’s stated concerns must be viewed in the context of the strategic advantage it would enjoy from delaying or diluting the success of the introduction of the applicant’s new joint services,” the partners said. “It would not be commercially feasible to launch these new services separately to the existing co-ordination, as Air NZ suggests.”
Qantas and American said December was the optimal time to launch given it coincided with peak demand on the trans-Pacific routes and was also when the Boeing 777-300ER to be used by American on the Sydney-Los Angeles route would become available.
“Launching at this time will mean that the applicants can capitalise on capturing increased traffic flows around this time of year, while also minimising the financial losses that would result from having available aircraft underutilised or idle,” Qantas and American said. “Air New Zealand would be a major beneficiary of any delay or dilution of success of the new services.”
Other groups, including Tourism Australia, Brisbane Airport, Sydney Airport and the Department of Infrastructure and Regional Development expressed support for the deeper alliance between Qantas and American in submissions to the ACCC.
Air NZ competes for Australian passengers – especially those living outside Sydney – on trans-Pacific flights to Los Angeles, San Francisco, Vancouver and soon Houston via a stop in Auckland. Despite the pressure, ratings agency Moody’s on Friday upgraded the Kiwi carrier’s rating to Baa2 from Baa3 in part due to expectations that lower jet fuel prices and favourable demand would sustain its financial performance over the next 12 to 24 months.
Qantas and American will not sell tickets on the new services, poised to launch in December, until they receive interim approvals for their expanded alliance from the Australian Competition and Consumer Commission. December is a peak season in terms of demand and higher fares are charged during that period than other times of year that are quieter.
In a submission to the competition regulator, Air NZ said there was “no compelling reason” why the revenue-sharing alliance between Qantas and American should begin in December given they could do so through other means such as code-sharing or wet-leasing under existing alliance approvals that do not expire until June.
“As the ACCC notes in its own guidance, a relevant factor in granting interim authorisation is whether an application could have been lodged sufficiently early to have made the request for interim authorisation unnecessary,” Air NZ said.
“While any delay to full co-operation between the parties may result in a less than optimal launch of these services from the parties’s perspective, this delay has only been caused by the parties themselves not allowing sufficient time for the authorisation process.”
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