The Australian Competition and Consumer Commission (ACCC) has conditionally granted interim approval for Qantas and Emirates to proceed with their proposed alliance covering passenger and freight services between Australia and Europe.
The interim authorisation allows the two airlines to now prepare a joint sales and pricing strategy, joint marketing, system integration, customer handling, scheduling and capacity management, the ACCC said in announcing its decision. Prior to the ACCC decision Qantas and Emirates had already begun some work in areas that did not require the regulator’s approval, such as IT, frequent flyer programs and establishing an operational base for Qantas in Dubai.
In a statement announcing the decision, ACCC chairman Rod Sims said: “The ACCC is allowing Qantas and Emirates to start implementing their alliance because of the long lead time required to market and sell tickets before the commencement of long-haul services.
“In its draft determination issued in December, the ACCC formed the preliminary view, after conducting a detailed assessment, that the public benefits resulting from the alliance are likely to outweigh the public detriment which may result through its effect on competition where Qantas and Emirates offer overlapping services,” Sims added. “In most regions, this detriment is likely to be mitigated by a number of factors, including continued competition from a number of established airlines.”
“Under interim authorisation, the applicants will be able to commence activities that will enhance the product and service offerings to Qantas and Emirates customers.”
The draft and interim authorisations have been granted for five years, not the 10 years originally sought by the airlines.
However, the ACCC has specifically excluded trans-Tasman co-operation between the airlines from the interim authorisation.
“The ACCC raised concerns about the potential impact of the alliance on the overlapping routes between Australia and New Zealand. The ACCC is concerned that the alliance may have an increased ability and incentive to reduce or limit growth in its capacity in order to raise airfares. Therefore, the ACCC is granting interim authorisation on the condition that the applicants do not engage in the conduct for which authorisation is sought in relation to services between Australia and New Zealand,” Sims said.
In a statement welcoming the ACCC decision, Qantas acknowledged the exclusion of New Zealand, saying: “Today’s decision includes a condition that Qantas and Emirates not yet coordinate on services between Australia and New Zealand, reflecting the fact that New Zealand law does not provide for interim authorisation”.
The ACCC said it expects to make a final decision in March prior to the planned implementation of the alliance at the start of April.