One growing threat to Qantas

Hong Kong-based Cathay Pacific isn’t about to let Qantas (ASX: QAN) get all the Australasian action. The airline announced today that it is ramping up its Australia transport options with direct flights to both Adelaide and Cairns, expected sometime early next year.

According to The Sydney Morning Herald, Cathay is upping capacity to capture more Aussie tourists headed to China. By offering direct flights from these two cities, the airline will avoid flight cap issues it’s currently constricted by in other parts of the country.

As part of a bilateral air rights agreement, Cathay is only allowed 70 flights per week from Australia’s four largest airports. But by next March, the company expects to add on an extra four flights per week from its two new locations, with potential for further in the future.

Cutting out the competition

Cathay’s move undoubtedly increases competition between itself and other Australian and Asian airlines. Qantas could feel a cut from its Asia-bound flights, since the company currently doesn’t have any direct flights from Adelaide and Cairns on offer. The airline is trying to expand its Asian destinations reach, however, and a newly approved Jetstar-Qantas agreement allows the two corporations to collaborate on primarily Intra-Asian flights.

Airlines like Virgin Australia  (ASX: VAH) and Air New Zealand (ASX: AIZ) also compete for similar air space, but Cathay’s latest move puts a stronger stranglehold on its and Qantas’ Australia-Asia cartel. Qantas proved last year that it can beat Virgin in price wars, and Air New Zealand remains a relatively niche player. With Cathay stepping up its game, Qantas will need to rely on more than an outdated flight cap to keep its profits soaring.

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Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.

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