The Australian International Air Services Commission (IASC) has issued a draft decision blocking the proposed codeshare agreement between Qantas (QF, Sydney Kingsford Smith) and Cathay Pacific (CX, Hong Kong Int'l) on flights between Australia and Hong Kong Int'l.

On May 24, 2019, the IASC wrote that while the agreement would likely result "in some customer benefits", it would also likely "entrench and expand the market position of Qantas and Cathay Pacific, to the detriment of the Virgin Australia (VA, Brisbane Int'l) competitive position and the position of any potential future entrants on the route".

The Commission also pointed out that since the Oneworld carriers, also including Cathay Dragon, already have a codeshare agreement in place for services other than direct Hong Kong-Australia routes, they are in fact able to sell connecting itineraries. In particular, Qantas can sell tickets for flights from Australia via Hong Kong to third countries thanks to its existing agreements with Cathay.

"The Commission finds that the likely public benefits of the variation [of the existing Declaration] are substantially outweighed by the likely public detriment," the IASC said.

The decision is open for comments until June 7.

In January, Qantas applied to the IASC to allow Cathay Pacific to sell the return services from Melbourne Tullamarine and Brisbane Int'l, as well as the one-way flight from Sydney Kingsford Smith to Hong Kong, operated by Qantas, under its own code. The airline said in its filing that the sales would be limited to connecting passengers and would not include direct flights between the Australian gateways and Hong Kong only.

According to the ch-aviation capacity module, Qantas currently flies to Hong Kong from Brisbane (5x weekly), Melbourne (daily), and Sydney (2x daily). For its part, Cathay Pacific operates from its hub to Adelaide (5x weekly), Brisbane (11x weekly, including 4x weekly via Cairns), Melbourne (20x weekly), Perth Int'l (9x weekly), and Sydney (25x weekly). The two airlines have a combined 87.8% market share by capacity between Australia and Hong Kong, with the remainder held by Virgin Australia.

The existing codeshare partnership between the airlines covers select domestic services in Australia operated by Qantas and flights from Hong Kong to South Korea, India, Viet Nam, Japan, Myanmar, and Sri Lanka. Qantas also sells Cathay's flights from Perth and Cairns under its own code.