Qantas’ plan to open new routes to China alongside China Eastern has hit a bit of a bump as the ACCC moves to deny authorisation.
In November last year, the two airlines announced a new joint venture that would include new flights between Australia and China.
Hoping to commence mid-2015, the five-year agreement proposed new routes from new cities such as Brisbane and Perth to Shanghai.
Additionally, the agreement seeked joint operations in Terminal 1 at Shanghai International Airport.
ACCC to proposes to deny Qantas’ China Eastern agreement.
Although Qantas’ boss said the venture would improve schedules and connections for travellers, Australia’s watchdog believes it is likely to result in ‘significant public detriment’.
The Australian Competition and Consumer Commission (ACCC) said in a statement that it has drafted a decision to deny authorisation for the coordinated operations because it will give Qantas and China Eastern increased ability and incentive to limit capacity and/or increase airfares on the Sydney – Shanghai route.
Chairman Rod Sims said together Qantas and China Eastern currently account for more than 80 percent of capacity on the route and any cooperation would ‘greatly’ reduce competition.
“The ACCC understands Qantas’ desire to form an alliance with a Chinese airline to establish a gateway to North East Asia. However, the ACCC’s concern is that they have chosen to do so with their main competitor on the one route between Australia and China on which Qantas operates direct flights.”
Rod Sims, ACCC Chairman
The ACCC said it accepts that the agreement would have some public benefits, such as improved connectivity, however even this is seen as limited because the range of travel options beyond Shanghai will not automatically be increased.
ACCC Chairman Rod Sims says the agreement could reduce competition on the route.
“Passengers who value this connectivity and convenience are already able to fly with China Eastern directly. Therefore, this public benefit will only be likely to arise for passengers who have a preference to fly with Qantas,” the ACCC said.
The ACCC is seeking submissions from interested parties in relation to its draft determination, before making a final decision. Submissions are due by 8 April 2015.