Qantas has recently sought regulatory approval for a proposed variation that would allow the airline and its OneWorld alliance partner Cathay Pacific to codeshare on each other’s services between Australia and Hong Kong. But the move is facing opposition from one player in the field: Virgin Australia. The airline fears that if Qantas and Cathay are allowed to expand their codesharing deal, it would lead to concentration of market power by the two carriers, which already dominate the Hong Kong route.

Fueled by strong demand for travel between Australia and Asia, the competition over flights to Hong Kong has been heating up at home between the flag carrier Qantas and Virgin’s Australian brand for a while now.

Qantas, together with Cathay Pacific, the flagship carrier of Hong Kong, announced their codeshare agreement back in September 2018, raising the bar for the two airlines, but particularly for Qantas, which would now be able to extend its reach over the broader Asia region.

The deal, which came into effect the following month, applied to a total of 25 routes across Asia-Pacific. It allowed the Australian airline to sell tickets on Cathay Pacific and its subsidiary Cathay Dragon’s flights to 10 cities across India, Sri Lanka, Myanmar, and Vietnam connecting through Hong Kong. In turn, Cathay was now able to codeshare on 13 domestic Qantas routes.

Most importantly, the agreement would see Qantas codesharing on Cathay Pacific’s long-haul services from Hong Kong to two cities in Australia, Perth and Cairns. Qantas currently flies to Hong Kong from Brisbane, Melbourne and Sydney - all routes that its partner Cathay also flies.

And guess, which other airline flies between Australia and Hong Kong? Virgin Australia. The carrier has a broad network of destinations in Asia-Pacific, including direct flights to Hong Kong from the very same gateways of Melbourne and Sydney.  

Race for the “most valuable” market

Virgin Australia has been following a similar path as Qantas when it comes to growth plans, having its sights set on expansion into Greater China. No wonder, as China has been identified the fastest growing and most valuable Australian inbound market, according to Tourism Australia’s Greater China Country Profile.

“Until today, this route has been far too cozy with just two airlines flying it and it desperately needed Virgin competition, so we’re here today to shake things up on this route,” Sir Richard Branson said on the inaugural Melbourne-Hong Kong flight in July 2017, supposedly taking a jab at the two rival carriers and their duopoly on the Australia-Hong Kong route.

Virgin Australia operates daily services between Australia and Hong Kong utilizing its Airbus A330-200 fleet (Aero Icarus, CC BY-SA 2.0)

Come February 2018, and Virgin announces its daily Sydney-Hong Kong service. “Greater China is a key pillar of our strategy and the addition of Sydney services to our already popular Melbourne flights to Hong Kong strengthens our proposition immensely,” Virgin Australia Group Executive Rob Sharp has said launching ticket sales on the route.