The Australian Competition and Consumer Commission (ACCC) has officially denied authorisation for Qantas and Japan Airlines co-ordinate flights and pricing under a joint business agreement.
The pair first announced their intentions in December to launch a new business that would include an expanded codeshare relationship, additional flights, new routes and collaboration on pricing.
After previously suggesting it might move to deny authorisation, the ACCC has argued the agreement would “likely lead to reduced competition” following the reintroduction of international travel between Australia and Japan, and make it difficult for other airlines to operate between the two countries.
“The ACCC can only authorise an agreement between competitors if it is satisfied the public benefits would outweigh the harm to competition. The alliance did not pass this test,” ACCC chair Rod Sims said.
“Airlines have been severely impacted by the pandemic and this has been a very difficult period for them. But preserving competition between airlines is the key to the long-term recovery of the aviation and tourism sectors, once international travel restrictions are eased.”
Prior to the COVID pandemic, Qantas and Japan Airlines together accounted for around 85 per cent of all flights between Australia and Japan, meaning a greater partnership between these two carriers would make it extremely difficult for other carriers, such as Virgin Australia, to break into these routes.
“We accepted that there was likely to be some short-term benefits from the alliance being able to jointly reinstate services more quickly when borders are reopened, which may initially stimulate tourism,” Sims added.
“However, the longer-term benefits of competition between airlines are cheaper flights and better services for consumers, which is vital to the recovery of tourism over the coming years.”
The ACCC stated in its draft decision in May that it was proposing to deny authorisation for the partnership.
Since the draft decision, Qantas has announced it would launch a new service between Cairns and Tokyo, which the ACCC encourages.
“We think Qantas could commence a new Cairns service without the alliance, and the timing of any such service would be best determined by commercial factors in a competitive environment,” Sims said.
“Jetstar services on this route are currently planned to start again from February 2022, without the alliance.”
Had the proposal been accepted, the Qantas and Japan Airlines alliance would have allowed the airlines to stop competing on all aspects of price and service for three years.
Qantas and Japan Airlines had 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.
The news is likely to come as a blow to Qantas, as the airline prepares to ramp up its international operations ahead of Australia’s easing border restrictions.
According to projections completed by the airline, Australia is set to reach 80 per cent vaccination in its adult population by December, allowing both state and international border restrictions to ease.
However, Qantas did note that the international re-opening is likely to be “gradual”, with a focus on low-risk countries first, including those with high vaccination uptake including the UK, US, and parts of Asia.
From mid-December, Qantas and Jetstar will reinstate international schedules between Australia and low-risk countries, including Singapore, the US, Japan, the UK, Canada and Fiji.
Meanwhile, in recent weeks, the Australian government has suggested it will lift its policy banning Australian citizens and residents from leaving the country as soon as November, and is currently rolling out digital vaccine passports for the purposes of international travel.