The ACCC has revealed it’s proposing to deny authorisation for Qantas and Japan Airlines to co-ordinate flights and pricing when international travel resumes.
Commission chair Rod Sims said the deal would “undermine competition significantly” because it would make it too difficult for another airline to challenge on routes where the pair currently have few rivals.
Australian Aviation reported in December how the two airlines wanted to launch a new business in July that would include an expanded codeshare relationship, additional flights, new routes and collaboration on pricing.
In a statement on Thursday, Sims said he was proposing to deny authorisation and appealed for submission from interested responses by the end of the month before a final decision is made.
“An agreement for coordination between two key competitors breaches competition laws. The ACCC can only authorise these agreements if the public benefits from the coordination outweigh the harm to competition,” Sims said.
“At this stage, we do not consider that Qantas and Japan Airlines’ proposal passes that test.
“Before the COVID-19 pandemic, Qantas and Japan Airlines were the only two airlines offering direct flights between Melbourne and Tokyo. They were also two of only three airlines, the other being All Nippon Airways, offering direct flights between Sydney and Tokyo.
“The airline and tourism sectors have been severely impacted by the COVID-19 pandemic. Protecting competition in the airline industry is critical to ensuring recovery in the tourism sector, once international travel restrictions ease.
“This proposed coordination would appear to undermine competition significantly by reducing the prospect of a strong return to competition on the Melbourne–Tokyo and Sydney–Tokyo routes when international travel resumes.
“Granting this authorisation would seem to eliminate any prospect of Qantas and Japan Airlines competing for passengers travelling between Australia and Japan, as they did before the COVID-19 pandemic. This elimination of competition would benefit the airlines at the expense of consumers.
“We took into account that there may be some short-term benefits from the proposed agreement such as allowing Qantas and Japan Airlines to more quickly reinstate flights between Australia and Japan. Our current view is that these are outweighed by the severe harm to competition.
“We have been willing to be flexible in granting limited exemptions from competition law during this time of severe economic impact on the travel sector due to COVID-19. However, we must ensure that this doesn’t open the door to anticompetitive agreements that significantly harm competition in the medium to long term.”
The news will come as a huge blow to Qantas, given the federal government has repeatedly hinted Japan may be one of the first countries Australia opens to in a travel bubble. The deal was due to come into force in July.
Qantas and Japan Airlines hoped the move would allow:
- An expanded codeshare relationship and optimised schedules on flights between Australia and New Zealand and Japan;
- Enhanced frequent flyer benefits for Qantas and JAL customers, including better earning of Qantas points or JAL miles on routes;
- Qantas customers to have access to 14 new codeshare destinations in Japan and JAL customers to have access to 15 new codeshare destinations in Australia and New Zealand; and
- Co-ordination of pricing, schedules, sales and tourism marketing.
Qantas chief executive Alan Joyce said, “Around half a million people visited Australia from Japan in 2019. We want to see that tourism resume and grow even further by making it easier for Japanese travellers to visit.
“It will be a win for our customers, a win for trade and a win for the 1 million people who work in tourism across Australia.”
Currently, only Australian citizens and permanent residents are allowed to enter the country, with international students, temporary visa holders and tourists banned altogether.
Those who do enter are subject to a mandatory 14-day quarantine period for which they have to pay up to $3,000.