Virgin Australia-Qantas get equal shares for Haneda slots
Virgin Australia and Qantas will share the two new Tokyo Haneda slot pairs between Australia and Japan, following an IASC (International Air Services Commission) decision on 29-Oct-2019.
With the 2020 Tokyo Olympic Games looming, the Japanese Government had released 50 return flight slots per day at Haneda's primarily domestic airport, all to be used for international routes, to be shared equally by foreign and Japanese airlines.
The largest number predictably went to the United States, but Australian airlines were awarded two slot pairs.
Qantas is, with its oneworld partner JAL and subsidiary Jetstar, easily the largest operator between the two countries with up to 46 weekly flights; ANA has 14 and, until the new award, Virgin Australia was absent from the market.
- Virgin Australia and Qantas will share two new Tokyo Haneda slot pairs between Australia and Japan.
- The Japanese Government released 50 return flight slots per day at Haneda for international routes, to be shared equally by foreign and Japanese airlines.
- Qantas, with its partner JAL and subsidiary Jetstar, is the largest operator between Australia and Japan, while Virgin Australia was previously absent from the market.
- The International Air Services Commission (IASC) decided that allocating one frequency to each airline would foster competition on the Australia-Japan route.
- Virgin Australia has been authorized to codeshare with ANA on the route and for points beyond at each end.
- The new slots at Haneda provide an opportunity for increased competition and better outcomes for consumers.
Summary
- Japan released slots allowing two new return passenger flights per day for Australian airlines and two for Japanese airlines between Australia and Haneda
- Qantas applied for both, arguing a more comprehensive outcome; Virgin argued a more competitive outcome if each received one pair of slots
- The IASC decided among other things that "Competition on the Australia-Japan route will more likely be fostered by the allocation of one frequency to Qantas and one to Virgin Australia."
- Virgin Australia has also been authorised to codeshare with ANA on the route and for points beyond at each end.
Qantas and Virgin Australia jostled for the two new slot pairs at Haneda. Honours even
Ahead of the 2020 Tokyo Olympic Games, the Japanese Government announced the release of 50 return flight slots per day at Haneda, to be allocated solely to international flights. Of the 50 daily slots created, 25 were assigned to Japanese carriers and 25 were assigned to foreign carriers.
Australia was one of only nine countries awarded the limited additional slots to Haneda, with the largest number predictably going to the United States.
Since its expansion, the downtown Haneda, which was previously an all-domestic airport, has become a very attractive target for foreign airlines. Being only 25 kilometres from the Tokyo CBD, it's an attractive point of entry for airlines who want to target business travellers.
By contrast, the newer Narita Airport, originally built to redirect all international services away from the congested Haneda, has remained less popular with airlines and travellers, largely because of its remoteness from the city and also because it lacks the large number of domestic connections that Haneda has. Haneda is therefore much more attractive to any international airline wanting to deliver better domestic connectivity.
The Australia-Japan air services signed in 2011 provides for open skies and no limit on capacity - except to or from Haneda Airport, a restriction which reflected the lack of spare capacity there.
More recently, in Sep-2019, a limited expansion of capacity at Haneda opened the door to the new airport access.
There was no doubt which airlines dominate the strongly growing market.
Australia-Japan capacity has more than doubled over the past five years; Qantas and Jetstar dominate with around 70% of the total
It was an important win for Virgin Australia
Had it not won the slots Virgin also effectively delivered an ultimatum, that it "…would not be prepared to commence services to Japan if our only option to serve Tokyo was through operations to Narita, as we would not have the ability to leverage our partnership with ANA (ANA offers 38 domestic code share connections to/from Haneda, compared to only five at Narita)".
Virgin argued the added competitive benefits: the extra capacity it "would inject into the market is likely to place downward pressure on airfares on the route, particularly on the Brisbane-Tokyo vv sector. Our services also have the potential to increase the availability of airfares in the lower-priced booking classes relative to the Qantas Group's proposal, given that we will bring more capacity on the route", naturally resulting in a more positive outcome for consumers.
The IASC decided to test this assertion by referring it to the ACCC, Australia's competition watchdog. The Commission's response probably disposed of the issue.
The Commission said: "allocating one frequency to each of Virgin Australia and Qantas would facilitate greater competition between Virgin Australia and Qantas, and other foreign carriers, on routes between Australia and Japan (including Brisbane and Tokyo). Virgin Australia does not currently operate flights to Japan in its own right, so Virgin Australia commencing flights on any route to Japan would naturally enable it to be more effective competitor than at present".
"[i]n the ACCC's experience, introducing more players into a market generally leads to greater competition and better outcomes to consumers".
The IASC accordingly decided among other things that "competition on the Australia-Japan route will more likely be fostered by the allocation of one frequency to Qantas and one to Virgin Australia."
"Queensland Inc" swung into action to support the Virgin Australia bid
The process provided an interesting contrast between the respective geographies. Virgin's headquarters are, thanks to some considerable government underwriting, in Brisbane; Qantas' are in Sydney.
If it were down to the "Queensland Inc" impact alone, the decision would already have been a foregone conclusion.
Destination NSW managed to get written endorsement from its tourism minister, for what was admittedly probably an ambit claim from Qantas anyway, for both slots. Seemingly Sydney Airport didn't even offer written support.
But Queensland pulled out all the stops. Its application was fulsomely supported by the Queensland Government's Attracting Aviation Investment Fund, the Department of Innovation and Tourism Industry Development, Tourism and Events Queensland and Brisbane Airport. Even the Queensland Minister for Innovation and Tourism Industry Development and Minister for Cross River Rail weighed in with her support.
A new era for Australia-Japan service, as well as for Virgin Australia
Japan Airlines celebrated 50 years of operations to Sydney in Sep-2019, but it hasn't always been plain sailing. At the beginning of the Japan to Australia tourism boom in the late 1980s and early 1990s, All Nippon Airways joined the competition and both airlines have since juggled their schedules as the market changed.
Today there is a reasonable bi-directional flow, but most of the recent growth has been driven by Australian travellers to Japan, as the country focussed more on inbound tourism under the open skies arrangement.
In each case, Qantas and Virgin's new services are due to start on 29-Mar-2020, the beginning of the new northern winter schedules and well in time to support Japan's hopes for a flood of visitors to the 2020 Olympics.
As Virgin Australia reshapes its domestic and international strategies, this was a vital gain and some much needed good news. It gives the airline a toehold in a significant market and seals a good relationship with Japan's largest airline.