The proposal for Qantas Airways Ltd and China Eastern Airlines Corporation Limited to extend their partnership has now taken a new turn, with the Australian Competition and Consumer Commission (ACCC) announcing that it currently leans towards blocking the move.
The ACCC said in a statement that Qantas and China Eastern are seeking authorization for an Extended Joint Coordination Agreement to enable the two airlines to coordinate passenger and cargo transport operations between Australia and China until the end of March 2024.
However, the commission has said that an agreement between two key competitors may breach competition laws. The ACCC also argued that it can only authorize agreements if the public benefits from the coordination outweigh the harm to competition.
China Eastern is currently the only airline flying direct between Sydney International Airport (SYD) and Shanghai Pudong International Airport (PVG), with Qantas planning to resume flights in late October 2023.
“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,” ACCC commissioner Anna Brakey said in a statement.
“We are concerned that the authorization would provide Qantas and China Eastern with the opportunity and incentive to increase prices, compared to what they would charge absent the alliance, by limiting or delaying the introduction of additional capacity on the Sydney-Shanghai route as passenger demand continues to grow,” Brakey added.
The ACCC predicts that demand for air travel between Australia and China is likely to keep growing between now and the end of March 2024, as Chinese tour groups return, and in the wake of Tourism Australia’s recent campaign in China promoting Australia.
“Any additional services on routes other than Sydney- Shanghai could potentially be a public benefit but we are not satisfied they are likely to eventuate between now and March 2024,” Brakey said.
In March 2023, the ACCC granted interim authorization to enable Qantas and China Eastern to continue their partnership while the ACCC assessed their substantive application for reauthorization.
The ACCC has said that it is seeking submissions in response to the draft determination by October 6, 2023, before making its final decision.