Australian High Court backs ACCC in cargo cartel

The High Court has unanimously dismissed appeals from from Air New Zealand and Garuda Indonesia.

Australia’s High Court has handed the Australian Competition and Consumer Commission (ACCC) a victory in its long-running case against a number of airlines on price fixing on certain air freight charges.

In a judgement handed down on Wednesday, the High Court unanimously dismissed two appeals from a decision of the full court of the Federal Court of Australia from Air New Zealand and PT Garuda Indonesia.

“The principal issue on appeal was whether there was a market ‘in Australia’ for the air cargo services for which the airlines competed for the purposes of the Trade Practices Act 1974 (Cth),” the High Court said in a statement.

“The High Court held that the findings of fact made by the primary judge led to the conclusion that there was such a market.”

ACCC commissioner Sarah Court said it was a significant win for the ACCC in the long-running, highly contested air cargo cartel proceedings that concerned price fixing agreements entered into between Air New Zealand, Garuda and other international airlines between 2002 and 2006 that breached Australian competition laws.

The ACCC alleged Air New Zealand in 2009 and Garuda in 2010 colluded with other airlines on charges for fuel, security, insurance surcharges, and a customs fee, for the carriage of air freight from origin ports in Hong Kong (both airlines), Singapore (Air NZ) and Indonesia (Garuda) to destination ports in Australia.

Under the Trade Practices Act as it then stood, the ACCC was required to establish that the conduct occurred in a “market in Australia”.

The Federal Court initially found that the market for the air cargo services for which the airlines competed was not in Australia.

However the ACCC appealed to the full court of the Federal Court. And the airlines then sought leave to appeal to the High Court.

“How a market is defined, including considerations of whether conduct occurs in Australia, are critical issues to the understanding and interpretation of Australian competition law,” the Court said in a statement.

“Today’s judgment sends a clear message that the ACCC is committed to pursuing cartel conduct that impacts on Australian business and consumers.

The ACCC said matters against Air New Zealand and Garuda would be “remitted to the Federal Court for a hearing as to relief, including penalty”.

The ACCC commenced court proceedings against 15 international airlines between 2008 and 2010. So far, 13 airlines have been fined a total of $98.5 million.

No	Airline	Date of Court Order	Penalty
1	Qantas	December 2008	$20m
2	British Airways	December 2008	$5m
3	Air France and KLM	February 2009	$6m
4	Cargolux	February 2009	$5m
5	Martinair	February 2009	$5m
6	Japan Airlines	April 2011	$5m
7	Korean Air Lines	November 2011	$5m
8	Malaysia Airlines	May 2012	$6m
9	Emirates	October 2012	$10m
10	Cathay Pacific	December 2012	$11.25m
11	Singapore	December 2012	$11.75m
12	Thai Airways	December 2012	$7.5m

Source: ACCC

 

Australian Aviation

ACCC grants five-year extension of Virgin Australia-Singapore Airlines alliance

Australia’s competition regulator approved an extension of Virgin Australia’s alliance with Singapore Airlines (SIA) for a further five years.

The Australian Competition and Consumer Commission (ACCC) said on Friday the alliance, which was first approved in 2011, “has resulted, and is likely to continue to result, in material public benefits”.

While Virgin and SIA had asked for a 10-year extension, the ACCC said its decision to approve the tie-up for only the next five years reflected the changing nature of the aviation sector.

“In light of the ongoing evolution of services between Australia and the United Kingdom and Europe and between Australia and Asia, including Virgin Australia’s proposed expansion of services into Asia, and the dynamic nature of the aviation industry, the ACCC considers it appropriate to review the authorisation earlier than the requested 10 years,” the ACCC’s final determination said.

“For this reason, the ACCC has decided to grant authorisation for five years.”

While Virgin does not operate to Singapore with its own aircraft, the airline has proposedmounting flights to Beijing and Hong Kong from June 1 2017 in partnership with Hainan-based HNA Group.

The Australian carrier also flies nonstop to Bali from Sydney and Brisbane, while SIA offers one-stop services to Bali from the Australian destinations to which it flies.

The ACCC said SIA’s flights to various Asian points from Australia via Singapore, “do not provide a significant competitive constraint”.

“The ACCC considers that, for services between Australia and each of Denpasar-Hong Kong-Beijing, passengers are unlikely to consider Singapore Airlines’ indirect services via Singapore to be a close substitute for Virgin Australia’s non- stop services,” the ACCC said.

“Singapore Airlines indirect services involve significantly greater travel time, reduced convenience, and in the case of Denpasar, significant back tracking.”

Further, there were a number of other airlines offering one-stop itineraries to between Australia and Asia.

“The ACCC considers that these rival airlines are likely to constrain the ability of the applicants to raise price [or] reduce services on their overlap routes,” the ACCC said.

“On this basis, the ACCC considers that the Alliance is unlikely to result in any significant anti-competitive detriment in relation to services between Australia and Asia.”

Final approval followed the ACCC’s draft determination issued in August.

In their May application, the two carriers said they would develop systems to better recognise their high value guests travelling on each other’s networks and flagged the use of data analytics to offer an improved customer proposition and services to customers, helping increase passenger numbers and earned revenue.

Virgin said in a statement the alliance had resulted in new services, such as SIA’s recently launched Singapore-Canberra-Wellington route, as well as flights to Cairns and Darwin operated by the Singapore carrier’s regional wing Silkair.

The pair currently had a joint network of 75 codeshare destinations in Asia, Europe and South Africa connecting onto 49 destinations in Australasia.

Virgin chief executive John Borghetti welcomed the ACCC approval.

“Together with our alliance partner Singapore Airlines, we look forward to continuing to provide Australian travellers with choice and competition on routes from Australia to Asia and Europe,” Borghetti said in a statement.

“We welcome the ACCC’s assessment that the alliance has and will continue to result in material public benefits through enhanced product and services and the promotion of competition in air travel.”

 

Australian Aviation

ACCC issues draft determination approving extension of Virgin-SIA alliance for five more years

Virgin Australia and Singapore Airlines look set to renew their alliance for a further five years after a draft ruling from competition regulator gave extending the tie-up the green light.

The Australian Competition and Consumer Commission (ACCC) draft determination published on Thursday said the partnership “had resulted, and is likely to continue to result, in material public benefits” including new routes, more online connection options and the promotion of competition.

Further, the ACCC said the partnership was also likely to bring about “small public benefits in the form of operational and other efficiencies which may be passed through to consumers in the form of lower fares or better services”.

“The ACCC is satisfied that the Alliance is likely to result in a net public benefit and proposes to grant authorisation,” the draft determination said.

SIA and Virgin’s application for renewal, lodged in May 2016, had called for re-authorisation for a 10 years.

However, the ACCC said five years was a more appropriate term, given the “ongoing evolution of services between Australia and the United Kingdom and Europe and between Australia and Asia, including Virgin Australia’s proposed expansion of services into Asia, and the dynamic nature of the aviation industry”.

“The ACCC considers it appropriate to review the authorisation earlier than the requested 10 years. For this reason, the ACCC proposes to grant authorisation for five years,” the ACCC said.

Virgin Australia general manager for alliances Phil Squires welcomed the ACCC draft decision and said the alliance with SIA offered choice and competition for Australians with better connection times, more direct routes and innovative loyalty options.

“Our alliance with Singapore Airlines not only stimulates competition on routes from Australia to Asia and Europe but also promotes competition for Australian passengers generally by providing them with a viable alternative choice of carrier for their combined domestic and international travel,” Squires said in a statement.

While Virgin does not operate to Singapore with its own aircraft, the airline has proposedmounting flights to Beijing and Hong Kong from June 1 2017 in partnership with Hainan-based HNA Group.

The ACCC said SIA’s flights to various Asian points from Australia via Singapore “do not provide a significant competitive constraint”.

“Where both airlines operate indirect services to destinations in Asia, there are a number of rival airlines providing services to those destinations which are likely to constrain the ability of the Applicants to raise prices or reduce services,” the ACCC said.

First approved in 2011, Virgin and SIA have been able to work together on schedule planning, capacity, pricing, revenue management, sales, distribution and marketing, frequent flyer offerings as well as purchasing and procurement.

SIA is also a major shareholder of Virgin and has a seat on the Australian carrier’s board.

In their May application, the two carriers said they would develop systems to better recognise their high value guests travelling on each other’s networks and flagged the use of data analytics to offer an improved customer proposition and services to customers, helping increase passenger numbers and earned revenue.

Submissions to the ACCC in response to the draft determination were due by September 9.

Meanwhile, the ACCC draft determination noted it had yet to receive an application from Virgin and HNA seeking approval to form an alliance.

 

Australian Aviation

ACCC to appeal $1.7 million fine over misleading Nurofen products

May 23 2016 – 12:43PM

Patrick Hatch

The consumer watchdog will appeal a $1.7 million fine issued to the maker of Nurofen over its misleading “specific pain” range, saying it should be increased to at least $6 million.

The Australian Competition and Consumer Commission says the fine handed down in the Federal Court last month is not severe enough to deter a company as large as Reckitt Benckiser from deceiving customers.

The ACCC says the $1.7 million fine is inadequate.  Photo: Supplied

The court found in December that Reckitt Benckiser engaged in misleading or deceptive conduct by falsely claiming that Nurofen specific pain products were formulated to treat particular types of pain.

In reality, each of the products – advertised to treat back pain, period pain, tension headaches or migraines — contained the same active ingredient: 342 milligrams of ibuprofen lysine.

The ACCC said on Monday that a penalty of at least $6 million was required to send a strong message, given the longstanding and widespread nature of Reckitt Benckiser’s conduct and the large profit it made from the products.

“$1.7 million in penalties imposed on a company the size of Reckitt Benckiser does not act as an adequate deterrent and might be viewed as simply a cost of doing business,” ACCC chairman Rod Sims said.

“This is particularly the case when the judge found that Reckitt Benckiser had made many millions in profits from sales of 5.9 million units of these products at around 8500 outlets during the relevant period.”

Reckitt Benckiser argued in court that a $1.1 million fine was appropriate.

Justice James Edelman said the penalty would have been “far greater” if it were not for a few factors, including that the ACCC had not argued that the company’s conduct was intentional or reckless.

He also gave the group a discount for co-operating with the ACCC’s investigation and admitting to its wrongdoing, which led to other allegations falling away.

Reckitt Benckiser said in a statement it was “considering the appeal with its legal advisers”.

The ACCC has filed a notice of appeal against the fine. A directions hearing will follow.

 

Source : The Canberra Times

Careers Australia to pay back $44 million

May 16, 2016 – 8:15PM

Eryk Bagshaw

Education Reporter

Students saddled with thousands of dollars of course fees will have their public debt reversed, after the Australian Competition and Consumer Commission successfully pursued one of the nation’s largest college networks for $44 million.

On Monday, Careers Australia, which has campuses in the Sydney and Melbourne CBDs as well as Parramatta, admitted it had breached Australian consumer law and “engaged in unconscionable conduct” while it enrolled students in some of the poorest, most remote communities in Australia into thousands of dollars of debt.

According to the ACCC, the conduct included misrepresenting that the courses were free, that they would lead to employment, and offering inducements such as iPads.

ACCC chairman Rod Sims says Careers Australia’s conduct ”affected some of the most vulnerable and disadvantaged groups of consumers in Australia”. Photo: Dominic Lorrimer

ACCC Chairman Rod Sims said it was unacceptable that Careers Australia enrolled consumers from a remote Aboriginal community but did not alert them to the debts they would incur.

“This conduct affected some of the most vulnerable and disadvantaged groups of consumers in Australia,” he said.

“It is also unacceptable that significant Commonwealth money went to fund courses that were often not undertaken.”

The court-enforced undertaking, revealed on Monday, allows Careers Australia to avoid court action in the Federal Court but compels the company to automatically cancel the enrolments of students who have not completed a unit of study, and to repay the Commonwealth any amounts received as a result of those enrolments.

Since 2013, the company has received $190 million in Commonwealth funding for 20,000 enrolled students. It has since begun the process of reversing enrolments and student debt, handing back $44 million to taxpayers, and relief to up to 12,000 students, some of whom live in impoverished communities.

The private college network has now been forced to implement a compliance program, including training for staff and regular reviews for its 15 campuses where it runs courses in nursing, business, counselling and community work.

Last year the company’s CEO, Patrick McKendry, stepped aside from his role as one of the federal government’s top advisers on vocational education pending the outcome the ACCC investigation.

Careers Australia is the fifth education provider to be pursued by the ACCC this year in its attempt to clean out the scandal-plagued vocational education sector.

So far, the ACCC has sought the return of more than $460 million in taxpayer funding from Sydney colleges Unique, Empower and AIPE, and Melbourne’s Phoenix Institute. It is understood the regulator has another five private operations in its sights.

Source : The Sydney Morning Herald

ACCC hopeful airports upgrades will lead to improved passenger experience

 

Australia’s competition watchdog says recent investments in new infrastructure, as well as planned improvements in the period ahead, should help lift the passenger experience at Australia’s four largest airports.

The Australian Competition and Consumer Commission’s (ACCC) Airport Monitoring Report for 2014/15 says despite high profit margins at Brisbane, Melbourne, Perth and Sydney airports, the quality of service passengers have received has not increased in recent years.

Brisbane maintained its “good” rating and retained its place as the highest rated of the four monitored airports in the ACCC report, a position it has held since 2004/05. Perth was the only other airport to receive a “good” rating.

Melbourne Tullamarine and Sydney were rated as “satisfactory” in 2014/15, the same as the prior year.

The ACCC was hopeful quality of service levels would improve given planned or recently completed infrastructure improvements at the four airports such as Melbourne Tullamarine’s new domestic terminal, Perth’s new Terminal 1 international terminal and domestic pier and Brisbane Airport’s third runway project.

“Over the period from 2004-05 to present, there have been no significant improvements in any of the monitored airports’ average quality of service ratings,” the ACCC report said.

“Passengers are likely to benefit from a significant boost to investment, with the four monitored airports undertaking the largest aggregate capital spend on aeronautical assets since the airports were privatised.”

The ACCC said the four airports continued to achieve high profit margins from aeronautical revenue, such as landing fees and use of terminal facilities, and from car parking in 2014/15.

And in the case of Sydney Airport, the competition watchdog found one dollar of aeronautical revenue earned a record 50.1 cents of profit in 2014/15, which the ACCC said was the “highest by any monitored airport over the period from 2004-05 to 2014-15”.

“The high profit margins of the airports indicate that they do not face much competitive pressure,” ACCC Chairman Rod Sims said in a statement on Wednesday.

Sydney had the highest aeronautical revenue per passenger in 2014/15 at $16.40, up 0.6 per cent from the prior year. Brisbane posted the largest increase in aeronautical revenue per passenger, which jumped 9.8 per cent to $12.22. Melbourne had the lowest result at $10.47, up 3.9 per cent, while aeronautical revenue per passenger fell 0.4 per cent at Perth to $12.64.

The ACCC report said the airlines using the four airports gave Melbourne, Perth and Sydney a “satisfactory” rating, while Brisbane was the only airport with a “good rating”. Sydney received the lowest rating out of the four monitored airports.

However, the ACCC said there was cause for optimism given the recent agreement between Sydney Airport and the Board of Airline Representatives of Australia (BARA) had a “service level framework” included for the first time.

“The service level agreement provides for the measurement of airport performance against various quality of service indicators for airlines and passengers,” the ACCC said.

“BARA advised the ACCC that this represents a significant step towards enabling improved service quality outcomes and hopes that other airports can adopt a similar arrangement where no framework exists or to enhance the existing framework.”

The ACCC report found all four airports continued to earn “significant profits” from car parking in 2014/15, given they were the only suppliers of car parking on airport grounds.

Sims said there were bargains to be had for those who took advantage of discounted pricing when pre-booking their parking online before coming to the airport.

“The ACCC found that consumers parking at the airports could save up to 66.5 per cent for longer durations by booking online,” Sims said.

“Consumers should consider all of their options, including whether they could obtain a cheaper rate by booking online or using an off-airport parking operator.”

The full report can be found on the ACCC website.

 

Australian Aviation

ACCC authorises American-Qantas alliance for five years

Australia’s competition watchdog has given final approval to Qantas’s partnership with American Airlines on trans-Pacific routes.

The green light from the Australian Competition and Consumer Commission (ACCC) leaves the two oneworld alliance members waiting for the US Department of Transportation (DOT) to hand down its decision on the tie-up.

The ACCC said in a statement on Thursday it had approved the American-Qantas partnership for five years, allowing the carriers to coordinate marketing, sales, freight, pricing, scheduling, distribution strategies including agency arrangements, yield and inventory management, frequent flyer programs, lounges, joint procurement, product and service standards with immunity from prosecution.

ACCC commissioner Roger Featherston said the alliance was likely to result in public benefits for passengers.

“The alliance is also likely to promote competition between other airlines that provide services on trans-Pacific routes,” Featherston said in a statement.

“The ACCC considers that the alliance is unlikely to result in any significant public detriment, largely because the ACCC accepts that American Airlines would have been unlikely to introduce its own trans-Pacific services in the absence of its alliance with Qantas.”

The ACCC issued a draft decision granting authorisation in November 2015.

American began flights between Sydney and Los Angeles in December 2015 with Boeing 777-300ERs, while Qantas returned to San Francisco for the first time in five years in the same month. Also, the US flag carrier is scheduled to fly to Auckland from June with Boeing 787 Dreamliners.

The New Zealand government approved the partnership in November 2015, while the US DOT said in February it had completed its investigation and was nearing a decision.

Qantas said it welcomed the ACCC decision, adding that the alliance gave passengers more choice for travel between Australia, New Zealand and the US.

“We’ve had a great response to Qantas’ new Sydney-San Francisco service and American’s new Sydney-Los Angeles service, and we’re looking forward to the launch of American’s LA- Auckland flights later this year,” a Qantas spokesman said in an emailed statement.

Qantas said it was “hopeful that the DOT will move quickly in approving our application”.

 

Source : Australian Aviation

Australian Competition and Consumer Commission approves American-Qantas expanded alliance in draft decision

The Australian Competition and Consumer Commission (ACCC) has issued a draft ruling giving American Airlines and Qantas’s proposed expanded alliance on trans-Pacific routes the green light for the next five years.

Although Qantas and American had an existing alliance that the ACCC approved in September 2011 for five years, the pair sought reauthorisation of a new agreement that included a revenue-sharing component to reflect American’s entry on trans-Pacific routes with its own metal and Qantas’s return to San Francisco.

ACCC Commissioner Jill Walker said the alliance was likely to benefit the travelling public through more flights and new destinations.

“The alliance is also likely to promote competition between other airlines that provide services on trans-Pacific routes,” Dr Walker said in a statement on Friday.

“The ACCC considers that the alliance is unlikely to result in any significant public detriment, largely because the ACCC accepts that American Airlines would be unlikely to introduce its own trans-Pacific services in the absence of its alliance with Qantas.”

In December, American will begin flights between Sydney and Los Angeles with Boeing 777-300ERs, while Qantas is relaunching services to San Francisco in the same month.

The US carrier is also adding Auckland to its network from June 2016 with Boeing 787s.

Under the alliance, Qantas and American would coordinate marketing and sales, freight, pricing, scheduling, distribution strategies including agency arrangements, yield and inventory management, frequent flyer programs, lounges, joint procurement, and product and service standards, the ACCC said.

The ACCC granted interim authorisation in July, which allowed Qantas and American to begin selling tickets for their proposed new flights.

The expanded alliance was approved by the New Zealand transport minister in October.

Qantas and American have also applied to the US Department of Transportation for approval of the expanded alliance.

Qantas said in a statement on Friday it welcomed the ACCC’s draft determination.

 

Australian Aviation

Australian Competition and Consumer Commission set to approve Virgin-Etihad alliance

Etihad Airways and Virgin Australia have received the green light to extend their alliance for a further five years.

In a draft ruling, the Australian Competition and Consumer Commission (ACCC) says it plans to re-authorise the alliance that was first established in 2011 and led to Virgin commencing flights on its own metal between Sydney and Abu Dhabi.

“The ACCC considers this alliance would likely result in continued public benefits through promoting competition and enhancing the products and services offered to customers travelling between Australia and the Middle East and onward destinations throughout Europe,” ACCC chairman Rod Sims said in a statement.

“The ACCC accepts that Virgin would not operate services to Abu Dhabi if this partnership with Etihad did not exist. Virgin could not offer a viable service on the route without offering the beyond connections available on Etihad’s network within the alliance.”

Under the partnership, the two airlines have extensive codeshare arrangements on each other’s networks, giving Virgin access to Europe and the Middle East and Etihad offline destinations in Australia, New Zealand and the Pacific. There are 89 codeshare destinations under the alliance.

There are also reciprocal frequent flyer benefits such as lounge access, priority checkin and extra luggage allowance.

However, the two carriers do not share revenue under the alliance.

Virgin Australia chief executive John Borghetti said the tie-up gave consumers more choice and competition for those travelling between Australia, the Middle East and Europe.

“Over the past five years, we have worked closely with Etihad Airways to ensure the alliance continues to generate benefits for consumers,” Borghetti said.

“We have introduced more codeshare destinations, delivered further enhancements to the customer experience and more than doubled seat capacity between Australia and Abu Dhabi, through the launch of new routes, more flight frequencies and larger aircraft.”

Etihad chief executive James Hogan also welcomed the ACCC draft determination and said the alliance would aim to expand its network and improve the passenger experience for travellers over the next five years.

“In its first five years, the partnership between Etihad Airways and Virgin Australia has promoted vigorous competition in the Australian travel market, increasing choice for travellers, and has generated significant benefits and increased revenue for each airline through the alignment of our operations,” Hogan said in a statement.

“Our shared commitment to innovation and superior service delivery ensures that travellers who fly on either airline enjoy an unrivalled guest experience and access to a combined network of 89 codeshare destinations.”

Further, Virgin noted the number of seats on the Sydney-Abu Dhabi route had increased 30 per cent as Etihad, which owns a little over 24 per cent of the Australian carrier and has a seat on the board, upgauged from Airbus A340-600s to Boeing 777-300ERs and eventually the Airbus A380.

Etihad has also commenced a second daily flight to Melbourne, added Perth-Abu Dhabi to its route network and replaced its Brisbane-Singapore-Abu Dhabi service with a nonstop Brisbane-Abu Dhabi offering using Boeing 787-9 Dreamliners.

Virgin flies between Abu Dhabi and Sydney three times a week with Boeing 777-300ERs.

 

Australian Aviation

Australian Competition and Consumer Commission to approve Qantas-China Eastern alliance

Qantas’s proposed alliance with China Eastern looks set for takeoff, with Australia’s competition regulator approving the partnership with conditions attached and reversing an earlier draft ruling to reject the tie-up.

The Australian Competition and Consumer Commission (ACCC) says the two airlines have to report their average fares, month by month, on each route that they operate between Australia and China as part of their partnership.

Moreover, the ACCC’s authorisation also required Qantas and China Eastern to increase their combined capacity on routes between Shanghai and Australia by a compound annual growth rate of four per cent. This represented a 21.67 per cent increase in capacity across these routes over the next five years.

ACCC chairman Rod Sims said the two carriers had provided significant commitments to add extra flights and launch new routes since it handed down a draft determination in March that proposed denying authorisation.

This included more flights from Shanghai to Melbourne, Sydney and Cairns during peak periods, as well as a new year-round service that has not been made public. There were also more destinations that would be covered by the two carriers’ existing codeshare agreement.

As part of the alliance, Qantas would move into Terminal One at Shanghai Pudong Airport, facilitating quicker transfers as part of making Shanghai the gateway into greater China.

“The ACCC considers that the addition of a significant number of new services, and expanded range of destinations, reflecting this gateway strategy, would constitute a significant public benefit” ACCC chairman Rod Sims said in a statement on Friday.

Sims said the capacity conditions imposed on Qantas and China Eastern as part of the five-year authorisation ensured coordination between the two carriers would not result in a reduction in the frequency of services provided below that which could be expected if the alliance was not in place and they continued to compete strongly with each other for passengers.

However, Sims said the ACCC believed the alliance would encourage additional new capacity above what was required under the five-year authorisation.

“The ACCC does not consider that capacity additions that simply keep pace with historical levels of growth are sufficient to demonstrate that the alliance will result in significant public benefits,” Sims said.

“The ACCC accepts that Qantas and China Eastern do not want to commit to additional capacity expansion until closer to the time that capacity will be added. However, the ACCC expects that successful implementation of the gateway strategy underpinning their public benefit arguments should result in significant additional growth in capacity above that required by the conditions the ACCC has imposed over the term of the authorisation.

“If this were to prove not to be the case, it may be difficult for the ACCC to accept that the alliance facilitates the addition of new frequencies and destinations, and the development of Shanghai as a gateway to greater China for Qantas and China Eastern, in any application for re-authorisation.”

While the ACCC acknowledged that “on balance” the tie-up would have public benefits, it also remained “of the view that the alliance could result in significant public detriment”.

This related to the dominance of Qantas and China Eastern on the Syndey-Shanghai route, which is the only route on which the two carriers overlap.

In its draft ruling published in March, the ACCC raised concerns with the market power of Qantas and China Eastern on the Sydney-Shanghai route, noting the pair operated about 83 per cent of all nonstop seats between the two cities, with Air China the only other airline on the route.

The ACCC said at the time such dominance on the route would give the two carriers the ability to limit capacity and lift fares for travellers between Sydney and Shanghai.

On Friday, the ACCC noted that competition between Qantas and China Eastern for passengers on the route would be greatly reduced under the alliance and “may provide them with the opportunity to increase prices for passengers traveling directly between Sydney and Shanghai”.

As a result, the ACCC said it would monitor Qantas and China Eastern’s ticket prices for travel between Australia and China.

“It is not uncommon for airlines to charge higher fares for passengers on a point-to-point route, where competition is limited, than for passengers travelling on the same flight who have an onward connection to a destination that is serviced by a variety of carriers,” Sims said.

“The ACCC considers that Qantas and China Eastern would have an incentive to adopt this strategy on the Sydney-Shanghai route if the alliance proceeds.

“To enable the ACCC to monitor such behaviour conditions have been imposed requiring Qantas and China Eastern to report to the ACCC their average fares, month by month, on each route between Australia and China on which they offer services.”

The draft determination was met with a strong response from both the Australian government (through a submission from the Department of Infrastructure and Regional Development) as well as the Chinese, whose ambassador to Australia wrote a letter to the ACCC arguing the benefits of the alliance. Tourism bodies also wrote to the ACCC to express their wish the tie-up was approved.

Qantas chief executive Alan Joyce said the airlines put a strong case to the ACCC about the benefits of the partnership.

“The joint venture with China Eastern allows us to increase capacity between the two countries by linking to key hubs and offer connectivity to each carrier’s behind and beyond networks,” Joyce said in a statement on Friday.

“By working with China Eastern we are able to maximise Qantas’ presence throughout China and build a more sustainable platform for future growth such as opening up new routes from Australia to Shanghai.

“We cannot fly to every destination in China. However our deepened relationship with China Eastern supports our successful strategy to work with key partners around the world to offer the most comprehensive network and world class travel experiences for our customers.”

China Eastern chairman Liu Shaoyong said he was happy with ACCC decision.

“Through this partnership we are helping to generate more tourism and trade opportunities with Australia and provide more convenient travel options for the many customers who travel between our two countries,” Liu said.

“We are excited by the possibilities ahead and look forward to helping our customers enjoy all that Australia and China have to offer.”

Australian Aviation