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Virgin Australia says that approval for Air Niugini and Qantas to expand their codeshare arrangements on Australia-Papua New Guinea (PNG) routes would jeopardise the viability of its own Brisbane to Port Moresby flights.
The airline has told Australia’s International Air Services Commission (IASC) it held strong concerns regarding the proposed continuation and expansion of Air Niugini and Qantas’s codesharing arrangements on Australia-Papua New Guinea routes.
“If allowed to continue, the codeshare services have the potential to jeopardise Virgin Australia’s ability to maintain a presence in the market, which would reduce choices available to consumers and limit scope to support the growth of Australian tourism and trade,” Virgin Australia said.
Australia’s second largest airline was responding to Air Niugini and Qantas’s application to the IASC to continue codesharing on the Brisbane-Port Moresby and Sydney-Port Moresby route, as well as extend the arrangement to Cairns-Port Moresby and Townsville Port Moresby.
Currently, Air Niugini, Qantas and Virgin Australia fly between Brisbane and Port Moresby, while Air Niugini is the only carrier offering nonstop services from Cairns, Sydney and Townsville to PNG.
In October 2016, the IASC partially approved Qantas and Air Niugini’s request for an expanded codeshare agreement on Australia-Papua New Guinea routes, allowing the pair to codeshare on Brisbane-Port Moresby and Sydney-Port Moresby, despite the vigorous opposition of Virgin Australia at the time.
Qantas lodged its application to expand the codesharing arrangement with Air Niugini in February 2018, arguing it offered “maximisation of the public benefit“.
And Virgin Australia has again come out strongly opposing the application, arguing the performance of its Brisbane-Port Moresby service during the past 12 months suggested the existing Air Niugini and Qantas codesharing had “distorted the competitive landscape by enabling the two largest carriers to strengthen their market dominance”.
As a consequence, in February the airline cut its schedule on the route to five flights a week, from six flights a week previously.
“The commercial performance of Virgin Australia’s services on the PNG route deteriorated dramatically in 2017, following the commencement of parallel code share services by Qantas and Air Niugini between Brisbane and Port Moresby,” Virgin Australia said.
“This deterioration forced us to review our capacity in the market, which eventuated in the removal of our Sunday service.
“Despite the fact that the average fares we offered in 2017 were significantly cheaper than those offered by our competitors, we were unable to attract sufficient passengers to achieve a reasonable load factor.”
Virgin Australia said its average load factors on the Brisbane-Port Moresby route fell from 48.6 per cent in 2016 to 35.0 per cent in 2017.
By contrast, Air Niugini improved its average load factors 2.1 percentage points to 54.3 per cent, while Qantas achieved a 7.2 percentage point increase to 57.6 per cent.
Virgin Australia said it has become “very challenging to compete effectively on the route” and its options to improve the commercial performance of those flights were “extremely limited”.
“With outbound travel to PNG dominated by business traffic, further reductions in our schedule would severely damage our selling proposition with the business traveller, curbing our ability to both retain and win corporate contracts on the route,” Virgin Australia said.
“Without the ability to increase our loads, it will become very difficult for us to maintain our presence in the Brisbane-Port Moresby market in the future.
Air Niugini said in its submission the codeshare arrangement would continue to “foster greater public benefit by offering passenger and freight customers a wider range of products” on the Brisbane and Sydney routes than either carrier could offer separately.
It said the proposed Qantas codeshare on Air Niugini’s Cairns and Townsville flights would “assist the viability of these services”.
The PNG carrier said it would have to “carefully review the ongoing sustainability” of its Cairns and Townsville operation, as well as consider reducing services or withdrawing completely from Sydney and downgaugiqg Brisbane from widebody aircraft to narrowbody equipment should the IASC not approve the application.
“Air Niugini considers that there are strong grounds for the IASC to grant the proposed variation in full, on the basis that it is likely to result in significant public benefits, relative to the likely situation if the proposed variation is not granted,” Air Niugini said.
VIDEO: Papua New Guinea Prime Minister Peter O’Neill talks about the start of flights to Townsville on the Townsville Enterprise YouTube channel
Qantas’s submission noted it and Air Niugini both independently priced and sold services on the PNG route, with both carriers operating their own yield management systems as part of the free sale codeshare arrangement.
Townsville Airport, the Townsville City Council and local business groups have come out in support of the proposed codeshare.
It is not the first time of late that an Australian airline has threatened to withdraw from a route should a regulator not decide in its favour – last week Qantas said it could be forced to withdraw from Dallas/Fort Worth if the US Department of Transport withheld approval of an expanded alliance with American Airlines on trans-Pacific routes.
New Air Niugini-Qantas codeshare would jeopardise Virgin Australia PNG flights
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Comments (21)
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Baxter
says:Maybe Virgin should just improve its product, and it might be able to hold its own wait. I’m sure Brisbane is still a virgin HUB. And good on nuigini for flying into Townsville and cairns. We should be ensuring that airline is looked after as it looks after our regional centers
Craigy
says:Qantas and Air Niugini independently set fares for seats on each others aircraft as part of the code share deal that Virgin say is more expensive then what they charge yet they can only get an average load factor of 35%. Sounds like the problem is with Virgin more than the code share arrangements.
Veejette
says:Whinge, whinge, whinge, that’s the only one thing Virgin’s good at!
I agree with Baxter’s above comment.
Virgin should improve themselves in many areas’, & maybe they’ll then get more business.
First thing they should be doing is to stop calling humans’ who travel with them ‘guests’. They’re not, as they PAY for their plane seat!
Any human. travelling on any type of moving conveyance, is a ‘passenger’.
Lechuga
says:I’m genuinely surprised their isn’t really a connection between Darwin and Port Moresby, and Melbourne and Port Moresby.
Brisbane and Sydney I can understand, Cairns and Townsville also. Would’ve really thought Melbourne and Darwin would be connected to Port Moresby too.
Scott
says:Why any regulator would allow a tie up between two dominate companies/airlines/group at either end of a market is beyond me.
Whinge, to right ! The smaller guy has every right to express their dismay. Wouldnt you if Bunnings/masters. Coles/woollies
CBA/NAB got in bed together at ANY level, call it whatever you want, there is no reason at all to do it without profits in mind or forcing out competition, that’s the end game.
What was the wording
“Maximum consumer Benefit” yeh right.
KFB
says:The only productive thing that Virgin can do is whinge! They need to focus on improving their product. I went on a flight with them and they adressed everyone like this, “Ladies and Gentlemen, I would like to welcome all of our GUESTS onboard this service to Melbourne.” I silently squealed in my head, “DO I LOOK LIKE A GUEST TO YOU!!!!!” They never even said the word passengers for the entire flight. So, Veejette and Baxter, I agree!
Matt
says:VA should improve their offering rather than trying to stop their competitors growth. Their loads are down while PX and QF have remained steady. PX’s offering on board is far superior to what VA provides. While VA may be slightly cheaper, their baggage allowances of one bag and meal offerings are a joke. Air Niugini provides a full service of bar and catering even in Economy class. Crew are another huge factor; PX Crew are amazingly happy and helpful, and always make you feel welcome. A vast comparison between what the two airlines offer. I will always be brand loyal to PX. VA let themselves down in this respect. The saying rings true, those who spend their time looking for the faults in other usually make no time to correct their own. Great work Air Niugini!
Cindy
says:Only air nuigini fly cairns pom so prices are higher now !!!bring back PNG air or Qantas cairns pom route
GBRGB
says:Another whinge from Virgin, it is really getting to the pathetic stage, do Virgin offer fares between TSV -POM or CNS – POM, no, they should not even be allowed to make a submission, they don’t even fly the route, what a farce. I am in TSV and our company only use QF, if I want to go to POM currently I have to fly via BNE, so I don’t go, if we had a codeshare I would definitely use the TSV – POM service, I hope they completely ignore Virgin.
Craigy
says:@ Scott. Two dominate carriers. Are you serious. Three airlines compete on the BNE – POM route and two achieve load factors of just over 50%. All Virgin can manage is 35%. Since QF and PX set fares independently ie no collusion then the prob is Virgins end. VA have caught the Branson disease
Andy
says:Virgin’s loads are poor because their product is poor compared to QF and especially PX.
If VA feel so disadvantaged why don’t they do their own code share with fast expanding PNG Air – oh wait they had one once but stuffed it up through their own bullying and arrogance.
Peter
says:Give me a full service PX 767 over a VA 737 anytime. Didn’t VA (then DJ) have a tie up with PNGAir at one point?
It’s simple. Offer a good product or be beaten. When I fly to the Solomons give me the QF code share with lounge access on the middle aged A320 any day of the week.
johnjohndadon
says:If Virgin spent more time improving it’s product rather than whinging I’m sure they could raise passengers loads.
One idea is that maybe VA could focus on the passengers that connect to New Zealand. PNG doesn’t have a direct flight to NZ so the majority have to travel via Brisbane. VA could rework their schedule to suit these travelers.
Rod Pickin
says:Coming from an operational arena rather than marketing I fail to see the benefits on most occasions of “Code sharing”, the best description I have would be, ” Predatory ” QF has a record of optg out of a service and then when convenient, optg back in, see PER SIN PER. – For many years, P.N.G and PX have had a close affinity with FNQ in particular CNS which has been a huge source of fresh consumables, TSV with it’s engineering base is a logical extension supporting the mining industries within P.N.G. If a code share was included in this region it could only benefit QF at the expense of PX. – On the SYD POM PX service which as they claim is running about 75% load factor, clearly the market is well supported and to me, a code share would only benefit QF and not PX.
As for services ex BNE, 3 carriers, a mix of equip, well that needs looking at. I do feel for VA as operationally they, in my opinion, are switched on but commercially the Big Chief, Mr. B. only thinks of the pax in the front of the bus, if you happen to win a seat behind the curtain, aft, well better luck next time. Been there etc.
David Rudland
says:My question is: If VA is the cheapest, why is it not supported more than it is? It’s commonly considered that both PX/QF are somewhat on-the-nose- with consumers due to their renowned price gouging, especially PX, being a mostly monopoly carrier within PNG.
Mike
says:Quoting Virgin Australia directly from your article, “Despite the fact the average fares we offered in 2017 were significantly cheaper than those offered by our competitors, we were unable to attract sufficient passengers to achieve a reasonable load factor”, my question to VA is, what are the competitors doing right to win customers?
If QF and PX were undercutting VAs fares there would clearly be a valid reason for complaint, however VA has the cheaper fares.
That the competitors are charging higher airfares and still drawing more patronage makes one wonder why people are avoiding VA?
There doesn’t appear to be an argument at all against QF and PX code sharing in this case.
Maybe VA management should be looking more carefully at their own product compared with the competition and then either match or better what is on offer. It seems that is where the problem lies.
Andy
says:That’s easy David Rudland. For a start VA don’t employ a single person in PNG so their marketing of themselves and the route up here is zero (Virgin who ??).
Secondly their fares may be slightly cheaper, but they are not the cheapest option because on top of the fare there are ridiculous charges if you want so called extras like a meal, drinks, entertainment and bags. Oh and if anyone has the temerity to even ask if PNG currency is accepted for these “luxuries” the crew can barely contain their laughter. Imagine how that goes down with the PNG travelling public when they can just pay one price on Air Niugini or Qantas and get service included.
VA seriously need to look at their product if they want to be taken seriously – what works in domestic Australia doesn’t necessarily translate to the Pacific Islands (I hear VA’s loads to Honiara are dire as well, and then of course there was the Virgin Samoa adventure…..)
Doug bell
says:I am often critical of QF for not always taking a “regional lead” when it comes to diversifying or expanding various potential parings (Trans Tasman for example, which I might add VA and ANZ do very nicely out of thank you very much) That said on this current issues with PNG. Ok a few perhaps obvious observations 1) Timetabling, even if it’s cheap, if you are providing a service that is inconvenient, then you ain’t going to attract the punters 2) with a market like PNG where there is only one “big airline” then that airline is going to partner with another airline and someone else misses out, sorry VA you had a chance a few years back and lost out 3) PNG Nationals will usually favour their own airline and as such the partnership with QF is a security blanket to attract Aussies into the country and provide some additional Eastern seaboard capacity, Although I agree with one of the other contributors, Darwin, Melbourne and Adelaide could easily be accounted for using a mixture of 737/ 330 equipment. I also agree with several of the comments in regard to VA (lack of) Cabin service, they have tried to rebirth themselves as a “full” service airline, but if they are still charging for everything other than tea coffee or water, on a 3 plus hour flight out of PM to Brisvegas then no wonder the punters are deserting them.
Craigy
says:@Rod Pickin. code sharing has two forms. 1. is you purchase seats at set price and then market them for the price you want to sell at. This means the airline operating the service gets revenue and the codeshare airline gets revenue without operating the service. 2. Joint venture with revenue sharing like the Emirates – Qantas agreement. So in this case, PX uses QF marketing power etc for the extra revenue which helps to make the PX services viable.
@Doug Bell, wrt the timetabling. The VA service departs BNE mid morning between QF and the PX service. So I don’t think timetabling is an issue.
Have flown to POM on PX. Service is good, flight attendants really friendly and food generally ok.
Having recently released their half yearly results, given the load factors on the BNE-POM service, makes you wonder how many other routes aren’t doing very well. Helps explain the poor profitability of VA.
k lane
says:Maybe VA should consider or examine Connecting Auckland direct with Port Moresby
Harrison
says:Air North Said That It Might Fly To PNG Form Darwin