VIRGIN BLUE TAKES PREDATORY PRICING ACTION TO ACCC QANTAS DUMPING CAPACITY ON KEY VIRGIN BLUE ROUTE

Virgin Blue Airlines has lodged a formal complaint with the Australian Competition and Consumer Commission believing that Qantas Airways Ltd. is engaging in illegal predatory pricing practices.

The complaint follows a move by Qantas to increase its capacity on the Brisbane to Adelaide route by 50%, after Virgin Blue announced a greater than 90% capacity increase last September.

Virgin Blue said last year that it would begin flying the route as of February 1 this year but was able to bring forward its Brisbane-Adelaide launch date to December 2000 - coincidently Qantas ramped up its services for Virgin Blue’s originally publicly stated date of 1 February 2001.

Australia’s true low fare carrier is calling on the competition watchdog to investigate the motives of Qantas in following Virgin Blue’s increase of service on this route, considering the airline hasn’t shown any previous interest to increase flights between Brisbane and Adelaide.

Chief Executive Officer, Brett Godfrey, said “In light of the fact that Virgin Blue has just recently added over 90% capacity to the market, offering fares that were on average half that of Qantas fares, we are extremely concerned that Qantas is simply retaliating and using its industry dominance to try and push us off the playing field”.

Virgin Blue believes it is imperative for the ACCC to be vigilant in ensuring the survivability of competition in the domestic aviation market. It has asked the Commission to investigate the economic rational behind Qantas’s actions.

“Our concerns relate to blatant capacity dumping. As far as we know, Qantas has not received a new aircraft to operate the route and it appears it has cancelled another service to fly the extra Brisbane to Adelaide flight, after Virgin Blue announced plans to offer direct services between the two cities”.

Virgin has been down this road before with Qantas’s largest shareholder, British Airways, and Virgin Blue will fight vigorously for the right to continue providing affordable airfares to the public that can be sustained for the long term.

“It’s been a decade since Australia had real competition, choice and low fares. Unfortunately Qantas is resorting to tactics similar to those used against Compass to drive us off this previously underserved market. We hope that the ACCC will support Virgin Blue and the interests of the traveling public in our application for fair play”, finished Brett Godfrey.

(Note – Short term capacity dumping is an airline industry term used when a competitor takes an irrational interest in a route by increasing the number of seats/flights on a route that was previously constrained or deemed of marginal interest until the arrival of competition. To complete this scenario, the incumbent carrier often chooses to operate this route below its normal cost structures. In doing so, it applies a tactic used to force a competitor out of the market, allowing it to achieve its traditionally high profit margins over the long term)