The ACCC has extended Qantas and China Eastern’s authorisation to collaborate on flights between their two home countries until March 2023.
Significantly, the competition commission has also removed a key condition that prevented the two airlines working together to service flights between Sydney and Shanghai, due to the effects of COVID.
The organisation said the final decision would result in a public benefit by assisting the two businesses to reinstate flights and grow capacity more quickly as travel restrictions ease.
“The ACCC also considers that as travel between Australia and China resumes, the extended Joint Coordination Agreement is likely to result in public benefits by assisting the applicants to provide an expanded range of destinations on a single ticket, improve connectivity, provide shorter journey times, and provide a wider range of loyalty program benefits,” it said in its final decision.
Previously, the pair were banned from co-operating on the Sydney – Shanghai route, which they both operated, as it accounted for 23 per cent of all travel between China and Australia.
“Qantas and China Eastern were each other’s closest competitors on the Sydney – Shanghai route, each was likely to be the other’s most significant competitive constraint on the route, and the ACCC considered that this competition was likely to be lost under the alliance.
“The ACCC considered that this would provide Qantas and China Eastern with the ability and incentive to unilaterally reduce capacity, or limit growth in capacity, to increase prices on this route.
“To address this concern, the ACCC imposed conditions of authorisation requiring Qantas and China Eastern to maintain at least an aggregate base level of capacity across routes between Shanghai and Australia and on the Sydney – Shanghai route.
“Qantas and China Eastern were also required to grow capacity in aggregate across routes between Shanghai and Australia over the term of the authorisation by a compound annual growth rate of 4 per cent.
“The conditions of authorisation also required Qantas and China Eastern to provide specific data to the ACCC at the end of each scheduling season, including data about capacity added, passengers flown and average fares on each route between Australia and China on which they operated services.
“The ACCC remains of the view that in times of more normal levels of demand for services between Sydney and Shanghai, as was the case prior to the COVID-19 pandemic, and likely will be again in the medium to long term, the lessening in competition between the applicants on the Sydney – Shanghai route as a result of the Proposed Conduct is likely to result in a significant public detriment.
“However, the ACCC notes that current demand for flights between Australia and China is low and there is uncertainty about the extent and timing of a recovery in demand that is likely to occur.”
The original agreement was authorised in 2015 and this new deal will expire on 31 March 2023.
The news comes after Qantas announced in January it would seek to launch a new business with Japan Airlines in July.