The ACCC has issued a draft determination proposing to deny authorisation for Qantas Airways Ltd and China Eastern Airlines Corporation Limited and their related entities (including Jetstar) to continue coordinating operations between Australia and mainland China.
Qantas and China Eastern are seeking authorisation for an Extended Joint Coordination Agreement that enables them to coordinate passenger and cargo transport operations between Australia and China until the end of March 2024.
An agreement for coordination between two key competitors may breach competition laws. The ACCC can only authorise these agreements if the public benefits from the coordination outweigh the harm to competition.
“At this stage we are not satisfied that the likely harm to competition from Qantas and China Eastern’s proposed coordination would be outweighed by any potential benefits,” ACCC Commissioner Anna Brakey said.
Currently China Eastern is the only airline flying direct between Sydney and Shanghai with Qantas planning to resume flights in late October.
“We are concerned that the authorisation would provide Qantas and China Eastern with the opportunity and incentive to increase prices, compared to what they would charge absent the alliance, by limiting or delaying the introduction of additional capacity on the Sydney-Shanghai route as passenger demand continues to grow,” Ms Brakey said.
The ACCC considers that demand for air travel between Australia and China is likely to keep growing between now and the end of March 2024, as Chinese tour groups return and following Tourism Australia's recent campaign in China promoting Australia.
“Any additional services on routes other than Sydney- Shanghai could potentially be a public benefit but we are not satisfied they are likely to eventuate between now and March 2024,” Ms Brakey said.
“A key difference between now and the previous authorisations is we have not been provided with sufficient evidence that the coordination would lead to additional services on other routes between Australia and China.”
On 30 March 2023, the ACCC granted interim authorisation to enable Qantas and China Eastern to continue to coordinate their operations while the ACCC assesses their substantive application for re-authorisation. That interim authorisation remains in place and Qantas and China Eastern have been invited to make submissions on a transition to end authorisation.
The ACCC is seeking submissions in response to the draft determination by 6 October 2023, before making its final decision.
Further details about the application and how to make a submission are available on the ACCC’s public register at Qantas Airways Limited & China Eastern Airlines Corporation Limited.
Background
The ACCC previously authorised this alliance in 2015 with conditions and in 2021 without conditions due to the exceptional circumstances related to the COVID-19 pandemic, and its associated effects on travel.
Notes to editors
ACCC authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act (CCA).
Section 91 of the CCA allows the ACCC to grant interim authorisation when it considers it is appropriate. This allows the parties to engage in the proposed conduct while the ACCC is considering the merits of the substantive application.
Broadly, the ACCC may grant authorisation when it is satisfied that the likely public benefit from the conduct outweighs any likely public detriment.