Australian competition authorities target Qantas

Australia’s competition watchdog today launched legal action against Qantas Airways, claiming the flag carrier slashed fares and increased seats on a domestic route to try to eliminate Sir Richard Branson’s Virgin Blue.

Australia’s competition watchdog today launched legal action against Qantas Airways, claiming the flag carrier slashed fares and increased seats on a domestic route to try to eliminate Richard Branson’s Virgin Blue.

Qantas ‘‘substantially’’ increased the number of seats available on its Brisbane-Adelaide route and matched or undercut Virgin Blue’s fares to ‘‘eliminate or substantially damage Virgin Blue, or to deter or prevent Virgin Blue from engaging in competitive conduct in the market,’’ the Australian Competition and Consumer Commission said.

The commission wants to fine Qantas £3.78m (€6m), and gain an injunction to stop the airline misusing its market power again in a similar way.

Qantas chief executive Geoff Dixon rejected the commission’s allegations, and said the company would ‘‘vigorously defend this action’’.

‘‘The competitive response by Qantas has clearly been supported by and benefited consumers as it has resulted in more services, greater choice and cheaper fares,’’ Dixon said.

Sir Richard’s cut-price carrier, Virgin Blue, began flying twice a day between Brisbane and Adelaide in December 2000.

Before that, Qantas and collapsed airline Ansett were the only carriers operating direct flights between the two cities.

The route is not well patronised compared to flights between Australia’s largest cities of Sydney and Melbourne.

The ACCC said the number of seats on the route was almost doubled after Virgin Blue’s entry. Part of this was to do with Qantas adding another daily flight, increasing its own capacity by 50%.

Qantas ‘‘knew that the effect of adding substantial capacity between Adelaide and Brisbane and offering fares at or below those of Virgin Blue would be that all competitors on the route would operate at a loss’’ and one would eventually withdraw from it, the ACCC said.

‘‘Qantas had the financial resources and strength to sustain the losses on the route longer than its competitors,’’ the commission said.

Preliminary hearings will begin in the Federal Court in Sydney on June 11.