Qantas will be prosecuted under the Trade Practices Act for an alleged
attempt to drive competitor Virgin Blue out of a market by undercutting prices,
the Australian Competition and Consumer Commission announced yesterday.
If the ACCC allegations are proved, Qantas could face a fine of up to $10
The case involves the Brisbane-to-Adelaide route, which was serviced by two
Qantas and one Ansett flight a day until Virgin entered the market in late 2000,
with two extra flights.
Qantas responded by introducing an extra flight which brought the total
number of daily flights to six and more than doubled the total number of seats
per day on the route and matching cheap Virgin fares.
The chairman of the ACCC, Professor Allan Fels, said the consumer watchdog
believed Qantas's behaviour amounted to ``capacity dumping" increasing the
total number of seats well beyond passenger demand, thus ensuring no carrier on
the route was profitable.
Qantas had misused its market power, to ``damage and possibly eliminate
Virgin Blue from that market and also to deter it from competitive conduct in
that market and in other markets," he said. ``There was a signalling effect, in
Professor Fels declined to answer questions about the size of losses
incurred by Virgin, the true costs of the flights and how much of a loss Qantas
was trading at, but said evidence would be given in court.
The ACCC is seeking fines against Qantas, injunctions to prevent any
repetition of such behaviour, and an order requiring the airline to implement a
new corporate compliance program on trade practices.
The chief executive of Qantas, Geoff Dixon, said the airline had engaged in
a ``legitimate, commercially justified, competitive response" to Virgin's
challenge on the route, and had benefited consumers through more services and
``The commission's action is likely to have a chilling effect on legitimate
competition, not only in the aviation industry but across the economy," Mr
Virgin Blue welcomed the ACCC action, and its chief executive, Brett
Godfrey, urged the Federal Government to strengthen the Trade Practices Act to
allow the ACCC to take action eliminating predatory conduct in line with
aviation regulations in Canada and the United States.Ansett's regional
subsidiaries, Hazelton and Kendell, look likely to be sold to the Australiawide
consortium, after the group won preferred bidder status. Hazelton's
administrator, Michael Humphris, said it would be at least another two weeks
before a contract of sale was signed, with the consortium aiming to develop a
merged airline covering four states.Qantas yesterday denied a review of
operations in its regional subsidiary QantasLink would mean job losses. Mr Dixon
said the changes to QantasLink this year which came in the wake of Ansett's
collapse would expand regional services and mean more aircraft and jobs.