QANTAS: Competition authority rejects code share agreement with China Eastern

Today, the Australian Competition and Consumer Commission (ACCC) has issued a draft proposal to deny the Qantas Group – which includes Jetstar – and China Eastern Airlines the authority to continue coordinating operations between Australia and mainland China. The ACCC routinely does this to allow objectors to provide additional evidence. In this case by 6 October 2023, before it issues a final decision.

The two airlines were granted permission initially in 2015 with conditions. Then, authority was given without conditions in 2021. This allowed the airlines to coordinate passenger and cargo transport operations until March 2024. The ACCC acknowledges that the current arrangement may breach competition laws. But it authorises such agreements if it believes that the benefits to the public 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.”

Anna Brakey, ACCC Commissioner

Only airline on the route

China Eastern is the only airline currently flying the Sydney to Shanghai route, and the ACCC fears that if it extends the agreement, then Qantas and China Eastern will just increase the fares:

“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,”

Anna Brakey, ACCC Commissioner

The ACCC thinks that demand for air travel between Australia and China will keep growing to the end of March 2024, as Chinese tour groups return and following promotion campaigns run in China by Tourism Australia.

“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.”

Anna Brakey, ACCC Commissioner

2PAXfly Takeout

Qantas currently can’t win a trick with the ACCC. Nor does it deserve to, given the allegations about still selling cancelled flights up to 40 days after they were cancelled!

As Chinese airlines ramp up their international services, it seems appropriate to remove decisions that propped it up, rather than encouraged competition.

Let’s hope removing the anti-competitive code-share agreement allows more flights between Australia and the centre of the world.