Australia’s competition regulator has issued a draft decision knocking back China Eastern and Qantas’s application for a proposed alliance.
The Australian Competition and Consumer Commission (ACCC) draft determination said the partnership was “likely to result in significant public detriment by giving Qantas and China Eastern increased ability and incentive to limit capacity and/or increase airfares on the Sydney-Shanghai route”.
ACCC chairman Rod Sims said Qantas and China Eastern accounted for more than 80 per cent of capacity on the Sydney-Shanghai route and were the “major competitive constraint on each other” given they were the only carriers offering direct flights.
“The ACCC understands Qantas’s desire to form an alliance with a Chinese airline to establish a gateway to North East Asia,” Sims said in a statement on Tuesday.
“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.
“Competition between them will be greatly reduced under the proposed agreement.”
While the ACCC acknowledged there would be “some limited public benefits” as part of the proposed alliance, it was not convinced the benefits outweighed with “significant public detriment likely to result from Qantas and China Eastern coordinating their services on the Sydney-Shanghai route”.
Submissions from interested parties in response to the ACCC’s draft decision were due by April 8.
Comment was being sought from Qantas and China Eastern.