[2023] IASC 123

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The Commission makes a fresh determination allocating to Qantas Airways Limited unlimited passenger and freight capacity on the New Zealand route. The Determination permits Qantas Airways Limited to offer code share services on the route with: Alaska Airlines, American Airlines, Air Tahiti Nui, British Airways, China Airlines, China Eastern Airlines, China Southern Airlines, Emirates, Finnair, Japan Airlines, LATAM Airlines, and SriLankan Airlines. The capacity may be used by either Qantas Airways Limited or its wholly-owned subsidiary, Jetstar Airways Pty Limited and for the latter to offer code share services with Emirates and LATAM Airlines. The determination is valid for 99 years from 13 March 2024.

1 The application for renewal

1.1    On 14 March 2014, the International Air Services Commission (the Commission) issued Determination [2014] IASC 102 (the Determination) allocating, in favour of Qantas, unlimited passenger and freight capacity on the New Zealand route. 

1.2    The Determination permits Qantas and its wholly-owned subsidiary Jetstar Airways Pty Limited (Jetstar) to utilise the capacity. The Determination permits Qantas to provide code share services with American Airlines; Air Tahiti Nui; British Airways; China Eastern Airlines; China Southern Airlines; Emirates; Japan Airlines; and LATAM Airlines. The capacity may also be used by Jetstar to provide code share services with American Airlines and Emirates. 

1.3    The Determination was varied several times to permit Qantas to utilise the capacity for code sharing with Alaska Airlines , Finnair , China Airlines , SriLankan Airlines , subject to certain conditions; and for Jetstar to utilise the capacity for code share services with LATAM Airlines , subject to certain conditions. 

1.4    Section 17 of the International Air Services Commission Act 1992 (the Act) requires the Commission to start its consideration of the renewal of a determination at least 12 months before the expiry of the original determination. The Determination is due to expire on 14 March 2024. In view of this, the Commission sent, on 27 March 2023, a letter to Qantas inviting it to apply for renewal if it wished to renew the Determination.

1.5    On 22 June 2023, Qantas applied to the Commission to renew the Determination for a further 99-year period and requested the retention of all existing conditions. 

1.6    In accordance with sections 12 and 17 of the Act, the Commission published, on 23 June 2023, a notice on its website and subsequently sent a notification by email to stakeholders inviting other applications for capacity on the route. No other applications were received.

1.7    On 1 December 2023, Qantas sought to amend its original application to omit the condition permitting the use of the capacity by Jetstar to offer code share services with American Airlines.

1.8    All non-confidential material supplied by the applicant is available on the Commission’s website (www.iasc.gov.au).

2 Relevant provisions of the air services arrangements

2.1    Paragraph 7(2)(aa) of the Act provides that the Commission must not allocate available capacity contrary to any restrictions on capacity contained in a bilateral arrangement(s). Any variation made to an existing allocation of capacity should also not be contrary to any restrictions on capacity contained in a bilateral arrangement(s).

2.2    Under the Australia-New Zealand air services arrangements, Australian designated carriers may determine the frequency and capacity of services operated. 

2.3    Additionally, the designated airlines of Australia that meet the Single Aviation Market (SAM) airline criteria, as specified in the Australia-New Zealand air services arrangements, may determine the frequency and capacity of services operated. 

2.4    Australian designated carriers may enter into code-share, blocked space or other cooperative marketing arrangements, whether as the operating or marketing airline, with any airline including airlines of third countries, provided only that the airline holds the appropriate authority to conduct air transport on the routes or segments concerned.

3 Commission's consideration

3.1    Section 8 of the Act provides that the Commission may, at any time while a determination is in force, make a fresh determination allocating the capacity to which the original determination relates. Subsection 8(2) provides in part that the fresh determination must make the same allocation of capacity as the original determination unless the Commission is satisfied that the allocation is no longer of benefit to the public. In assessing the benefit to the public of an allocation of capacity, the Commission must apply the criteria set out for that purpose in the policy statement made by the Minister under section 11 of the Act. 

3.2    Pursuant to section 11 of the Act, the Minister issued the International Air Services Commission Policy Statement 2018 (the Policy Statement), which came into effect on 28 March 2018.

3.3    Section 14 of the Policy Statement applies where the Commission is proposing to make a fresh determination under section 8 of the Act, and is considering whether the allocation of capacity in the original determination is no longer of benefit to the public for the purpose of section 8(2)(a)(i) of the Act. Section 14(2) of the Policy Statement provides that, without limiting the matters to which the Commission may have regard, an allocation is generally no longer of benefit to the public if:

• the carrier has failed to service the route effectively (s 14(2)(a)); and
• there are other applications for some or all of the capacity (s 14(2)(b)); and
• the Commission is satisfied that a different allocation of capacity would be of greater benefit to the public, having regard to the criteria set out in sections 8 and 9 of the Policy Statement (s 14(2)(c)).

3.4    The Commission notes that, under subsection 14(2) of the Policy Statement, an allocation will generally no longer be of benefit to the public where all of the above conditions are satisfied. 

3.5    There are no other applications for some or all of the capacity to which the determination in question relates, and therefore the condition in section 14(2)(b) of the Policy Statement is not satisfied. The Commission therefore finds that the proposed allocation does not fall within the class of allocations that are generally no longer of benefit to the public contemplated by subsection 14(2) of the Policy Statement.

3.6    However, subsection 14(2) of the Policy Statement operates ‘without limiting the matters to which the Commission may have regard’. In view of the circumstances pertaining to the COVID-19 pandemic, the Commission has proceeded to consider whether the allocation is no longer of benefit to the public in all the circumstances.

3.7    On 11 March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. In response, the Australian Government introduced a range of health, financial and other measures to prevent and minimise the transmission of COVID-19.

3.8    In this context, on 24 March 2020 the Prime Minister announced that the Australian Government was introducing a ‘do not travel’ ban on Australians travelling overseas under the Biosecurity Act 2015. On 27 October 2021, the Government announced it would lift the international travel ban for certain categories of travellers from 1 November 2021, subject to certain conditions. On 7 February 2022, the Prime Minister announced that Australian international borders would re-open from 21 February 2022. With the imposition of travel restrictions in March 2020, the Qantas Group suspended the scheduled international flights of both Qantas and Jetstar in 2020-2021.

3.9    In assessing the current Qantas application for the renewal of the Determination, the Commission considered whether Qantas has failed to service the route effectively. 

3.10    Until travel restrictions linked to the COVID-19 pandemic were imposed by the Australian Government in March 2020, Qantas and Jetstar operated regular services between points in Australia and New Zealand. Prior to March 2020, there was no information to suggest that Qantas has failed to service the Australia-New Zealand route effectively.

3.11    The Commission considers that the temporary suspension in 2020-2021 of the Qantas Group’s services between Australia and New Zealand was directly in response to travel restrictions associated with the COVID-19 pandemic. The Commission therefore finds that the temporary suspension of the Qantas Group’s services in these circumstances does not mean that Qantas has failed to service the route effectively. Moreover, the Commission notes that since April 2022, Qantas and Jetstar have resumed operating regular services between points in Australia and New Zealand.

3.12    The Commission has also considered the ‘reasonable capability criterion’ in section 8 of the Policy Statement, i.e. the extent to which all Australian carriers that are, or would be, permitted to use the capacity allocated under a determination are reasonably capable of: (a) obtaining any licences, permits or other approvals required to operate on and service the route to which the determination relates; and (b) using the capacity allocated under the determination.

3.13    The Commission notes that Qantas and its wholly-owned subsidiary, Jetstar, are established carriers that currently operate services between Australia and New Zealand. The Commission therefore finds that the carriers are reasonably capable of obtaining the necessary regulatory approvals and of using the capacity allocated on the Australia-New Zealand route.

3.14    There is no other information before the Commission that it considers to be relevant or material to its assessment of Qantas’ application. Based on its findings above, the Commission is not satisfied that the allocation of capacity in the original determination is no longer of benefit to the public for the purposes of section 8(2)(a)(i) of the Act. Therefore, the Commission is required to make the same allocation of capacity as the original determination (see section 8(2)(a) of the Act).

3.15    The Commission will continue to monitor the utilisation of capacity by the Qantas Group on this route.

3.16    Under section 19 of the Act, the Commission “must include the same terms and conditions as the original determination to which it relates” (s 19(1)(c)), but “may make such changes (if any) to the terms and conditions included in the original determination (including adding or deleting terms and conditions) as it is satisfied are warranted because of changes in circumstances since the original determination was made” (subsection 19(3)). 

3.17    As part of its application, Qantas also requested to retain all existing conditions, including permission for Qantas offer code share services with Alaska Airlines, American Airlines, Air Tahiti Nui, British Airways, China Airlines, China Eastern Airlines, China Southern Airlines, Emirates, Finnair, Japan Airlines, LATAM Airlines, and SriLankan Airlines. Qantas also wishes to retain conditions permitting Jetstar to offer code share services on the route with Emirates and LATAM Airlines. The Commission has decided to issue this determination subject to the conditions set out in item 4 below.

3.18    Nothing in this decision should be taken as indicating either approval or disapproval by the Australian Competition and Consumer Commission (the ACCC). This decision is made without prejudicing, in any way, possible future consideration of code share operations by the ACCC. 

4 Determination for renewal of [2014] IASC 113 allocating capacity on the Canada route to Qantas ([2018] IASC 121)

4.1    In accordance with section 8 of the Act, the Commission makes a determination in favour of Qantas Airways Limited, allocating unlimited capacity between points in Australia and New Zealand in accordance with the Australia – New Zealand air services arrangements.

4.2    The determination is valid for 99 years from 13 March 2024.

4.3    The determination is subject to the following conditions:

(a)    Qantas Airways Limited is required to fully utilise the capacity from the date the determination comes into effect or from such other date approved by the Commission.

(b)    The capacity may be utilised by:

• Qantas Airways Limited; or 
• Jetstar Airways Pty Limited, as long as it remains a wholly-owned subsidiary of Qantas Airways Limited; or
• such other wholly-owned subsidiary of Qantas Airways Limited that the Commission approves in writing, as long as it remains a wholly-owned subsidiary of Qantas Airways Limited.

(c)    As approved by the Commission, the capacity may be used by Qantas Airways Limited to provide code share or joint services with any wholly-owned subsidiary of Qantas Airways Limited and by any wholly-owned subsidiary of Qantas Airways Limited to provide code share or joint services with Qantas Airways Limited.

(d)    Neither Qantas Airways Limited nor its wholly-owned subsidiary Jetstar Airways Pty Limited are permitted to use the capacity to provide code share or joint services with another Australian carrier or any other carrier unless approved by the Commission.

(e)    Subject to the preceding condition, the capacity may be used by Qantas Airways Pty Limited to provide code share services with:

    i.    Alaska Airlines, in accordance with the code share agreement between the airlines made on 24 December 2005, as amended.

    ii.    Air Tahiti Nui, in accordance with the code share agreement between the airlines made on 12 May 2000, as amended.

    iii.    American Airlines, in accordance with the code share agreement between the airlines dated on or around 31 December 2016, as amended.

    iv.    British Airways, in accordance with the code share agreement between the airlines made on 19 November 2013, as amended.

    v.    China Airlines, in accordance with the code share agreement between the airlines made on 16 March 2018, as amended.

    vi.    China Eastern Airlines, in accordance with the code share agreement between the airlines made on 9 July 2008, as amended.

    vii.    China Southern Airlines, in accordance with the code share agreement between the airlines made on 10 February 2014, as amended.

    viii.    Emirates, in accordance with the code share agreement between the airlines made on 21 January 2013, as amended.

    ix.    Finnair, in accordance with the code share agreement between the airlines made on 23 December 2010, as amended.

    x.    Japan Airlines, in accordance with the code share agreement between the airlines made on 1 June 2008, as amended.

    xi.    LATAM Airlines, in accordance with the code share agreement between the airlines made on 1 August 2014, as amended.

    xii.    SriLankan Airlines, in accordance with the code share agreement between the airlines made on 16 September 2014, as amended.

(f)    Subject to condition (d), the capacity may be used by Jetstar Airways Pty Limited to provide code share services with:

    i.    Emirates, in accordance with the code share agreement between the airlines made on 11 February 2014, as amended.

    ii.    LATAM Airlines, in accordance with the code share agreement between the airlines made on 26 September 2015, as amended.

General conditions relating to code share services

(g)    Qantas Airways Limited must apply to the Commission for approval of the use of the capacity if there are variations to the code share arrangements which would change the relevant commercial aspects of the code share arrangement(s) from a free sale code share arrangement to a blocked space, or vice versa, or if Qantas Airways Limited (or Jetstar Airways Pty Limited) proposes to add third country routes on which the airlines will code share where Australian capacity will be used for services on that route.

(h)    To the extent that the capacity is used to provide code share or joint services on the route, the airlines must take all reasonable steps to ensure that passengers are informed of the carrier actually operating the flight at the time of the booking. Nothing in this determination exempts the airlines from complying with Australian Consumer Law.

Conditions about ownership and control

(i)    Changes in relation to the ownership and control of Qantas Airways Limited and/or its wholly-owned subsidiary are permitted except to the extent that any change:

-    results in the designation of the airline as an Australian carrier under the Australia — New Zealand air services arrangements being withdrawn; or

-    has the effect that another Australian carrier, or a person (or group of persons) having substantial ownership or effective control of another Australian carrier, would take substantial ownership of Qantas Airways Limited and/or its wholly-owned subsidiary or be in a position to exercise effective control of Qantas Airways Limited and/or its wholly-owned subsidiary, without the prior consent of the Commission.

Dated: 6 December 2023

GENEVIEVE BUTLER - Chairperson

JANE MCKEON - Commissioner