Qantas set to battle ACCC

Qantas set to battle ACCC
By Steve Creedy and Duncan Mcfarlane
May 09, 2002
QANTAS began building its case against the Australian Competition and Consumer Commission yesterday claiming a new Brisbane-Adelaide route was not aimed at crushing rival Virgin Blue.

In a briefing note circulated to analysts yesterday, the airline denied the extra daily service was an attempt to destroy Virgin by "capacity dumping".

The note came as ACCC chief Allan Fels hit back at "over the top" criticism from big business leaders claiming they only supported competition laws when they applied to unions and small business.

"I find the Qantas reaction pretty strange because the commission has been very reasonable to it over the years," Mr Fels told ABC radio.

The ACCC must prove that Qantas made the move with the intention of bringing down Virgin or Ansett.

But Qantas, which strongly denies it was capacity dumping, will argue the decision was commercial and based on a review that showed it would make more profit by adding the service compared with the alternative of taking no action.

The airline also denies it purposefully undercut Virgin, saying a 30 per cent difference in one-way fares was due to system problems caused by the GST. It says the daily return service allowed it to better service business customers and resulted in a capacity increase for all airlines of 17.1 per cent on the route.

That meant it did not keep the same capacity or market share it had prior to Virgin's entry.

The briefing note increased scepticism among analysts that the ACCC action will succeed.

"I think it's got a very slim chance of being successful," Salomon Smith Barney transport analyst Jason Smith said.

"It's one route in over 200 in the domestic network and it's an obscure one between Brisbane and Adelaide. If that's the only thing you can bring against them, then I think ACCC's clutching at straws."

Mr Smith believes the public brawl between Qantas and the ACCC will heat up and may hurt sentiment in the short term.

But he says it is unlikely to hurt the airline's strong overall outlook and is maintaining its forecast that Qantas shares, which closed up 2c at $4.60 last night, will be worth $6.10 within 12 months.

Mr Fels, who is locked in an increasingly acrimonious dispute with business leaders over the commission's powers, dismissed their criticism as the latest instalment in a long history of opposition to competition.

"Historically big business lobbies and some big businesses have had short-sighted and one-eyed attitudes to competition policy," he said