Airline balance of power on Tasman revealed as watchdog rules on Emirates and Qantas Christchurch–Sydney flights

Australia’s competition regulator is monitoring Emirates and Qantas prices and capacity between Christchurch and Sydney routes which both airlines operate.

The airlines’ 10-year-old deep commercial partnership has been approved for the next five years in a draft decision..

While the Australian Competition and Consumer Commission says other parts of the partnership (the conduct) are likely to be benefit tourism and trade, it will require regular information on the transtasman flights between Christchurch and Sydney, where services overlap.

‘’The ACCC considers the conduct would not be likely to raise competition concerns except in relation to the Sydney-Christchurch route,’’ it says in a draft determination which also details how transtasman aviation has recovered.

‘’On this route, the ACCC considers the conduct would be likely to result in a public detriment by enhancing the applicants’ (Emirates and Qantas’) ability or incentive to unilaterally increase price or reduce services on the route.’’

To address public concerns, the commission will monitor the airlines’ price and capacity decisions on the Sydney-Christchurch route.

The airlines will have to report data regarding the number of seats operated and passengers flown, passenger revenue and operating costs on the route over the five-year period of authorisation.

‘’This would allow the ACCC to monitor the competitive dynamics on the route and identify whether and to what extent the public detriment (as a result of the unilateral effects noted above) may be emerging,’’ the commission says.

The two airlines formed the partnership in 2013 and four overlapping routes were monitored in 2016. The review found then that the ACCC didn’t need to impose a requirement on them to increase capacity.

The determination also outlines the power balance on the Tasman as aviation recovers.

With Virgin Australia off main trunk transtasman routes, the balance of power has shifted on the route. Photo / Supplied

Qantas and Emirates (which operates an Airbus A380 between Christchurch and Sydney) account for the largest share of scheduled weekly return seats on the transtasman (49 per cent as at the last week of May 2023), followed by Air New Zealand (39 per cent).

Virgin Australia, which flies into Queenstown has a small transtasman presence (1.4 per cent) as at the last week of May.

China Airlines, AirAsia X, Qatar Airways and LATAM Airlines each accounted for 2 per cent to 3.1 per cent of scheduled weekly return seats.

The absence of Virgin Australia on routes between main cities has changed the balance of power on the Tasman. Before the pandemic it had about 15 per cent of market capacity.

Qantas chief executive Alan Joyce earlier this month told the Herald as new aircraft enter its fleet, the airline would consider non-stop flights from Auckland to the Sunshine Coast and to Perth as part of its expansion plan.

The commission says the Sydney-Christchurch route is the seventh largest transtasman route, accounting for 5 per cent of total capacity (seats flown) between Australia and New Zealand in 2019.

In the last week of May, three carriers operated passenger services on the route.

Emirates flew 7182 return seats per week on the route (51.6 per cent), Qantas flew 3828 return seats a week (27.5 per cent) and Air New Zealand flew 2910 seats per week (20.9 per cent).

Emirates is operating a similar number of return seats as it did before the pandemic, using the A380 aircraft.

Qantas, Jetstar and Air New Zealand use smaller aircraft, typically A320/21s.

In its ruling, the commission said in future, without the deal, it was possible Emirates would downsize or even cease operating Sydney-Christchurch services.

However, the ACCC considers it likely Emirates will maintain a significant presence on the route, due to:

• The international appeal of the South Island as a destination, including among passengers who prefer to fly with Emirates. Before the pandemic (in calendar year 2019), around one quarter of passengers who flew the Sydney-Christchurch route travelled on a ticket sold by Emirates.

• The large proportion of passengers on Emirates’ Sydney-Christchurch services that are origin-destination passengers on the route.

For the rest of the global deal, Emirates and Qantas successfully argued it would result in public benefits through enhanced products and services through increased connectivity and convenience, facilitating capacity restoration and expansion and better frequent flyer programme benefits.

Submissions are open on the draft determination to July 12.

Grant Bradley has worked at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.