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Qantas-SAA alliance scored two year extension

written by australianaviation.com.au | September 17, 2012

South African Airways operates A340 flights between Perth and Johannesburg as part of a codesharing deal with Qantas. (Rob Finlayson)

Qantas’s efforts to extend its codesharing partnership with South African Airways have won a partial victory despite concerns over its effect on competition, with the tie-up tentatively approved through 2014.

The International Air Services Commission earlier this year rebuffed a Qantas request to extend the codeshare for five years, instead proposing to terminate the 12-year-old partnership at the end of the year. Qantas appealed that decision to the Federal Court, arguing that the decision could force Qantas and SAA to cut services between Sydney, Perth and Johannesburg.

Qantas later dropped the legal action after the IASC extended its approval of the codeshare to March next year while it considers a new application.

In a draft notice, released today, the IASC proposed extending the codeshare though to 2014, still short of the five years Qantas had sought.

“In theory, the codeshare could create some incentives for competition in the marketing and sale of direct services between Qantas and SAA, but in practice these are likely to be limited,” the IASC said. “The commission considers that there are likely to be marginal public benefits gained from approving the codeshare until the end of 2014.”

But the commission said it believed passengers would be better served by direct competition between the airlines after 2014.

“In a situation where it may be economic for two carriers to operate competing services on direct routes, the commission considers that the codeshare arrangement could hinder rather than promote competition,” it said. “In particular, the commission is concerned that it may deter or delay the introduction of competing services, particularly on the Sydney route, and increase barriers to entry.”


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