Indonesian national carrier Garuda Indonesia is quitting the hotly contested Brisbane-Bali route from February 1, in a move that will be welcomed by rival carriers Jetstar and Virgin Australia.
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Garuda, which also flies to Bali from Sydney, Melbourne and Perth, said it was restructuring its global operations in response to the weakening Indonesian rupiah and unnamed "other factors" that it says have affected airlines globally.
It will also reduce frequency on flights between Indonesia and Japan, retire some aircraft early, sublease others and cut the number of business-class seats on its Boeing 737-800s from 12 to eight.
The Australia-Bali route has proved highly competitive during the past few years.
Garuda had offered five to seven return flights a week on Airbus A330 widebody aircraft between Brisbane and Bali, competing against direct options from Jetstar and Virgin and indirect options from AirAsia X and other Asian carriers.
Virgin in August took a $51 million impairment on its international business that chief financial officer Sankar Narayan attributed particularly to weakness on its Bali routes due to increased capacity and competition.
Virgin has since announced plans to buy the 40 per cent of low-cost arm Tigerair Australia that it does not already own, in a move that might allow it to transfer some of its Bali flights to the cheaper subsidiary.
The Bali market is comprised primarily of holidaymakers who tend to be price sensitive.
Virgin filled the lowest percentage of seats among carriers operating non-stop flights between Australia and Indonesia in October.
Indonesia AirAsia Extra, an arm of AirAsia X, has been considering non-stop flights between Brisbane and Bali that would avoid the need to stop in Kuala Lumpur.
But Indonesia AirAsia Extra failed to launch planned non-stop flights between Melbourne and Bali last month due to delays in receiving approvals from Indonesian regulators to operate that route.
It was instead forced to route the passengers through Kuala Lumpur, disrupting holiday plans, including for many of the customers who had pre-paid for accommodation.
The Malaysia-based AirAsia group is now under further scrutiny from Indonesian regulators after the crash of QZ8501, operated by its Indonesian domestic arm. The cause of the crash, which killed all 162 passengers and crew, is still being investigated.
Separately, Singapore-based low-cost long-haul carrier Scoot has signed an interline deal with Virgin. That will allow a customer in a city such as Hobart, which lacks direct Scoot flights to Singapore, to book via the Scoot website and fly the domestic leg on Virgin. The baggage would then be transferred to Scoot automatically.
Scoot is a wholly owned subsidiary of Singapore Airlines, which is one of Virgin's largest shareholders. Virgin already has an extensive codeshare relationship with Singapore Airlines.
Tigerair and Scoot have publicly commented on the possibility of striking a codeshare deal but to date they have not. Tigerair at present does not offer even baggage transfers to any other airlines, including Virgin.
Virgin chief executive John Borghetti has ruled out the possibility of Tigerair offering codeshares with Virgin as Qantas Airways does with low-cost arm Jetstar, because he wants to ensure the mainline and budget products remain distinct.
