Qatar-Virgin Australia deal: what it means for airfares and travellers
The airline deal has come a step closer to being approved. Could this ultimately lead to a fall in prices for long-suffering consumers?
Virgin Australia has been given the green light to start selling tickets on Qatar Airways-operated flights from Australia. If the Middle Eastern airline succeeds in its bid, yet to be approved, to take a 25 per cent stake in the Australian operator, could this lead to a fall in airfares for long-suffering consumers?
What is the deal?
Qatar Airways is seeking a 25 per cent stake in Virgin Australia for an undisclosed sum. As part of the deal, which will require clearance by the Foreign Investment Review Board, Qatar Airways will provide aircraft, pilots and cabin crew for what is being billed as Virgin Australia’s return to long haul international flying. Although Qatar Airways was denied its application for additional air traffic rights by the Australian government last year, this deal will clear that regulatory hurdle by using Virgin Australia’s rights to operate an additional 28 flights a week between Doha and the major airports of Sydney, Melbourne, Brisbane and Perth.
What does it mean?
It means Qatar Airways will effectively double its flights in and out of Australia from June 2025, with double daily services from Sydney, Brisbane and Perth, and three times a day from Melbourne.
The additional flights will give travellers more schedule options and connect to 107 “one stop” destinations from Doha’s Hamad International Airport with a layover time of four hours or less.
Although Qatar Airways’ aircraft and crew will operate the flights, they will be sold and ticketed as Virgin Australia services under what is known as a “wet lease” arrangement.
The deal requires the approval of the Australian Competition and Consumer Commission and Foreign Investment Review Board, which can take months.
However the ACCC has granted an interim authorisation to Virgin Australia so it can start selling tickets on the flights, with travellers typically booking international trips six months in advance.
A final decision will not be made until next March or April but at this point it appears that may be simply a formality.
If, as expected, the flights are approved, Virgin Australia is hopeful the arrangement with Qatar will eventually extend to new routes, including Doha to Western Sydney, Canberra and Darwin, and additional frequencies into Europe, and possibly Africa.
How might it affect airfares?
Capacity is the major driver of price in aviation markets, and more airline seats generally means lower prices.
As Flight Centre managing director Graham Turner told the inquiry into bilateral air service agreements, “more capacity means lower prices”.
“You may have noticed that Qatar now flies three times a week into New Zealand. When those flights were announced, the prices on a like-for-like basis in the same month, were down 10 per cent compared to the same month the year before. We notice December prices are down 14 per cent,” said Mr Turner.
The new Qatar-Virgin flights from Australia will mean an additional 354 seats out of each major airport a day, or 1416 in total.
Virgin Australia’s application to the ACCC points out that since the pandemic, fares to Europe from Australia have risen 41 per cent on average, and are up 56 per cent between Australia and the Middle East.
Working in Virgin’s favour is the lower cost of operating such flights compared with Qantas’s long-haul international services. Qatar Airways’ labour costs are estimated to be about a third of Qantas’s due to the different industrial relations regime in Qatar, as opposed to Australia. Labour costs are typically the second biggest expense for airlines, after fuel.
‘Qatar now flies three times a week into New Zealand. When those flights were announced, the prices on a like-for-like basis in the same month, were down 10 per cent’
How might it affect availability of flights?
It will give travellers more options, particularly those heading to the Middle East and Europe. Emirates and Etihad also fly via Middle Eastern hubs, and the additional Qatar Airways’ flights will give travellers another daily service on those routes.
Current load factors on flights to Europe from Australia via the Middle East show demand is still very strong, with about 90 per cent of seats filled on average, which bears well for any extra services such as those proposed by Qatar and Virgin.
What does it mean for code-share arrangements?
The biggest change to codeshare arrangements will be the removal of Etihad Airways from Virgin Australia’s partners, effective from June 1, 2025. It means Etihad customers coming into Australia won’t be able to book a Virgin domestic flight via the Etihad website, and vice versa; Virgin customers won’t be able to book with Etihad on the Virgin site. The end of the 14-year partnership is not expected to have a significant impact on travellers, with Etihad operating a smaller fleet and network than Qatar.
Virgin Australia customers will also no longer be able to book Singapore Airlines’ flights through to Europe from mid-2025, but those services can still be ticketed via travel agents and Singapore Airlines’ website.
Those changes are because of the condition of “exclusivity” imposed on the deal by Qatar Airways, which stipulates Virgin must only codeshare with Qatar on services to the Middle East, Europe and Africa.
Despite the condition, Virgin Australia says there will be no change to its codeshare arrangements with partners South African Airways and Virgin Atlantic, or United, Air Canada and ANA.
What does it mean for Velocity members?
Velocity members will have more opportunity to earn and use points on the Qatar-operated Virgin Australia flights. Eligible frequent flyers will also be able to access Qatar lounges in Doha and other ports such as London Heathrow and Charles de Gaulle in Paris.
There will be no change to the earning and redemption of points with Singapore Airlines or other Virgin partners, with the exception of Etihad Airways.
From June 1, Velocity members will no longer be able to earn or redeem points on Etihad flights, and gain access to Etihad lounges (unless travelling in business or first class with Etihad).
