Summary
- The ACCC will oppose Qantas and China Eastern Airlines’ application to proceed coordinating operations between Australia and China.
- The commission is anxious that the coordination would lead to increased prices and limited capability on the Sydney-Shanghai route.
- China Eastern currently operates 15 weekly services between Shanghai and Sydney with ample widebody capability so as to add more flights.
In per week of dark news for Australia’s flag carrier, Qantas, the pain continued today when the nation’s competition regulator said it will oppose an application for Qantas and China Eastern Airlines to proceed coordinating operations between Australia and China.
More grief for Qantas from the ACCC
The Australian Competition and Consumer Commission (ACCC) announced this morning it will not support the Prolonged Joint Coordination Agreement for the 2 airlines and their related entities, including Qantas low-cost subsidiary Jetstar, to proceed coordinating operations between Australia and mainland China.
Photo: Steve Worner/Shutterstock
The ACCC had previously authorized this alliance in 2015 with conditions and renewed it in 2021 without conditions as a consequence of the exceptional circumstances related to the pandemic and its effects on the travel industry. On March 30, 2023, the commission granted an interim authorization to enable the 2 airlines to proceed their alliance while considering the brand new application. The airlines have applied for the extension until the top of March 2024.
These agreements between airlines normally contain practices which will breach competition laws, and an ACCC authorization protects the carriers from facing any legal motion which will arise from the anti-competitive features of the coordination. Nonetheless, the regulator can only authorize these agreements if the general public advantages from the coordination outweigh the harm to competition.
The substantive issue is that currently, China Eastern is the one carrier flying nonstop between Sydney and Shanghai, with Qantas planning to start services on the route in late October. In its announcement, ACCC Commissioner Anna Brakey justified the choice by stating:
“At this stage we will not be satisfied that the likely harm to competition from Qantas and China Eastern’s proposed coordination can be outweighed by any potential advantages.
“We’re concerned that the authorisation would supply Qantas and China Eastern with the chance and incentive to extend prices, in comparison with what they’d charge absent the alliance, by limiting or delaying the introduction of additional capability on the Sydney-Shanghai route as passengers demand continues to grow.”
There may be loads of widebody capability at China Eastern
Based on Flightradar24.com, China Eastern operates 15 services weekly between Shanghai and Sydney with a combination of Airbus A350 and A330 aircraft. On Wednesday this week, the each day MU561 departed Shanghai Pudong International (PVG) at 21:02 and, after a ten:17 hour flight, landed at Sydney Kingsford Smith Airport at 09:19 on Thursday.
Photo: Markus Mainka / Shutterstock
The ACCC believes that demand for air travel between Australia and China will proceed to grow until the top of March 2024 as a consequence of Chinese tour groups returning and the impacts of selling programs in China by Tourism Australia. It also said that while additional services on any route aside from Sydney-Shanghai could potentially be a public profit, it isn’t satisfied that is prone to occur between now and the top of March 2024.
That is not the top of the difficulty for Qantas and China Eastern, because the ACCC has called for submissions from interested parties to be lodged by October 6, 2023. The commission will then consider the response, which is able to undoubtedly include something from Qantas and China Eastern, with a final determination due in November.
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