ACCC proposes to deny Qantas / Air New Zealand Tasman Agreement
The Australian Competition and Consumer Commission today issued a draft decision proposing to deny authorisation* of the Tasman Networks Agreement between Qantas and Air New Zealand.
The agreement would allow Qantas and Air New Zealand to coordinate all activities in respect to any flight on the trans-Tasman, including regular meetings to determine schedules and prices.
Qantas and Air New Zealand are the largest competitors on the trans-Tasman. Combined, they account for around 80 per cent of trans-Tasman passengers. Both operate wholly owned 'low cost carriers' (Jetstar and Freedom Air International) in this market.
"Authorisation of the agreement would fundamentally change the competitive process on the trans-Tasman", ACCC Chairman, Mr Graeme Samuel, said today.
"The ACCC considers that the agreement would only result in limited public benefits in the form of cost savings to the airlines as well as marginal improvements in schedule spread, connectivity and frequent flyer options for consumers.
"The ACCC appreciates that Qantas and Air NZ would continue to be constrained on the trans-Tasman, to some extent, by Virgin Blue and Emirates. However, because these rivals face impediments to further expansion on the trans-Tasman, they will not replace the competitive dynamic that will disappear under the agreement.
"In these circumstances, the limited benefits from the agreement will not outweigh what the ACCC considers will be significant detriment to consumers in the form of higher prices and reduced travel options at key times".
The ACCC is seeking submissions* from interested parties in relation to its draft determination. Submissions can be made to: The General Manager, Adjudication Branch, Australian Competition and Consumer Commission, PO Box 1199, Dickson, ACT, 2602. Submissions can also be lodged by email to adjudication@accc.gov.au or facsimile to (02) 6243 1211.
More information regarding the application is available by following the Authorising anti-competitive conduct and Authorisations links on the ACCC's website.
*The ACCC can grant immunity from the application of the competition provisions of the Trade Practices Act 1974 if it is satisfied that the benefit to the public from the conduct outweighs any public detriment. The ACCC conducts a public consultation process to assist it to determine whether a proposed arrangement results in a net public benefit.
Qantas and Air NZ applied for approval of an alliance in 2002. The scope of the proposed alliance was broader than the agreement as it involved all Qantas and Air NZ flights into, within and departing from New Zealand. It also involved Qantas acquiring equity in Air New Zealand.
That said, the trans-Tasman element of the proposed alliance was very similar to what is being proposed under the agreement.
The proposed alliance was considered by competition regulators on both sides of the Tasman (the ACCC and the New Zealand Commerce Commission), as well as the relevant appeal bodies: the Australian Competition Tribunal in Australia and the High Court in New Zealand. All but the Tribunal denied authorisation of the proposed alliance.
Because Qantas and Air NZ did not secure approval from the High Court in New Zealand, the proposed alliance was not implemented.
In assessing the current proposal, the ACCC has had the benefit of a further two years of market activity on the trans-Tasman. The ACCC has also undertaken an extensive public consultation process, and received new information from a range of key interested parties.
