Virgin Australia (VA, Brisbane Int'l) has expressed "strong concerns" on the impact that a proposed rollover and expansion of authorization for an existing code-share agreement between Qantas (QF, Sydney Kingsford Smith) and Air Niugini (PX, Port Moresby) would have on competition in the Australia-Papua New Guinea market.

In its submission to the International Air Services Commission (IASC) filed on March 2, Virgin Australia said that since the expanded agreement had come into effect over 12 months ago, its own services to Papua New Guinea had deteriorated to the extent that it had had to cut its Brisbane Int'l-Port Moresby service from 6x weekly to 5x weekly effective February. According to the ch-aviation capacity module, it is Virgin Australia's only PNG service.

Air Niugini currently codeshares on Qantas-operated flights between Brisbane and Port Moresby, as well as several domestic Australian services.

"Virgin Australia’s load factor fell from 48.6% in 2016 to 35.0% in 2017, while Air Niugini’s load factor strengthened by 2.1ppts to 54.3% over the same period," it argued. "The Qantas services achieved a load factor of 57.6% in 2017 - more than 22ppts higher than Virgin Australia’s load factor."

Virgin Australia went on to argue that although its average fares on the Brisbane-Port Moresby route in 2017 were significantly cheaper than those offered by Qantas and Air Niugini, they were unable to attract sufficient passengers to achieve a reasonable load factor. This is attributed to Qantas/Air Niugini's growing market dominance where, by virtue of the codeshare, the two airlines now market 60% of all seats offered on the Brisbane-Port Moresby route.

The carrier argued that the continuation of the codeshare services would jeopardise the sustainability of its services to PNG with few options to improve their performance. Virgin Australia said that as the route is dominated by business traffic, further reduction in either fares or schedule would be counter-productive and only lead to bigger losses.

Virgin has therefore requested the IASC to exercise caution in expanding its authorisation to include the Port Moresby to each of Cairns, Sydney Kingsford Smith, and Townsville markets. It has also requested that if the regulator does agree to roll over existing authorization for the Brisbane-Port Moresby route, that it impose conditions to ensure that there is a level of competition between the carriers.