Sydney, Sept 15: The Australian Competition and Consumer Commission (ACCC) has taken a decisive step by issuing a draft determination that suggests denying authorization for Qantas Airways Ltd and China Eastern Airlines Corporation Limited, along with their related entities, which include Jetstar, to continue coordinating their operations between Australia and mainland China.
Qantas and China Eastern have been seeking authorization for an Extended Joint Coordination Agreement, which would allow them to coordinate passenger and cargo transport operations between Australia and China until the end of March 2024. However, this agreement between two prominent competitors may potentially breach competition laws, and the ACCC can only grant authorization if it deems that the public benefits of the coordination outweigh any harm to competition.
ACCC Commissioner Anna Brakey expressed the regulator’s current stance, stating, “At this stage, we are not satisfied that the likely harm to competition from Qantas and China Eastern’s proposed coordination would be outweighed by any potential benefits.”
As things stand, China Eastern is the sole airline offering direct flights between Sydney and Shanghai, with Qantas planning to resume its flights in late October.
The ACCC is apprehensive that granting authorization might provide Qantas and China Eastern with an incentive to increase prices, compared to what they would charge without the alliance, by potentially limiting or delaying additional capacity on the Sydney-Shanghai route as passenger demand continues to rise.
The ACCC believes that the demand for air travel between Australia and China is expected to continue growing until the end of March 2024, especially with the return of Chinese tour groups and Tourism Australia’s recent campaign in China promoting travel to Australia.
Brakey elaborated, saying, “Any additional services on routes other than Sydney-Shanghai could potentially benefit the public, but we are not satisfied that they are likely to materialize between now and March 2024.”
She also highlighted a key distinction from previous authorizations, stating, “A key difference between now and the previous authorizations is that we have not been provided with sufficient evidence that the coordination would lead to additional services on other routes between Australia and China.”
On March 30, the ACCC had granted interim authorization to allow Qantas and China Eastern to continue coordinating their operations while the ACCC assessed their substantive application for re-authorization. This interim authorization remains in place, and both airlines have been invited to submit their views on transitioning to end authorization.
The ACCC is currently seeking submissions in response to the draft determination, with a deadline set for Oct 6, before making its final decision on the matter.
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