The curious case of Qantas and Virgin’s sudden interest in Indonesia
In our most recent analysis on importance of the A321neoLR to Jetstar and Qantas, we covered the idiosyncrasies of the Australia-Indonesia Bilateral Air Service Agreement (BASA). Under the BASA, Australian carriers are limited to 25,000 seats per week in each direction between Brisbane, Melbourne, Perth, Sydney, and Indonesia. This capacity is fully allocated to Qantas Airways and Virgin Australia.
Allocations are made at a group level, allowing Qantas to utilise their allocations across both the Qantas and Jetstar brands with flexibility. Furthermore, these allocations are not destination specific, allowing airlines to adjust capacity between destinations as they wish.
Under the BASA there are no restrictions or limitations on services between other points in Australia and Indonesia, and Qantas, Jetstar and Virgin have exploited this aspect of the BASA for several years. This means that Qantas, Jetstar and Virgin have no constraints adding capacity from Adelaide, Cairns, Darwin, or Gold Coast to Indonesia.
A third and unutilised part of the BASA are an additional 2,500 seats per week in each direction between Brisbane, Melbourne, Perth, Sydney, and Indonesia provided that the flights operate via or beyond another point in Australia. This has been referred to as the “enhanced regional package” in this and other BASAs (e.g., Australia-Qatar). No allocations to Australian carriers have been made under the enhanced regional package, nor have any carriers previously shown much interest in exploiting them, however this changed late last year.
Come November
On 17 November 2023, Qantas surprised all and sundry by applying to the International Air Services Commission (IASC) to allocate 2,320 seats under the enhanced regional package. As with all IASC applications, other airlines are invited to make competing applications before IASC make a decision.
Like clockwork, on 12 December 2023, Virgin applied for 2,464 seats per week under the enhanced regional package, signifying their intent to compete with Qantas for the allocation.