ACCC steps in on Qantas-Japan Airlines partnership

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September 14 2021
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Australia’s competition authority says that the short-term benefits of a new partnership between Qantas and Japan Airlines don’t outweigh the long-term costs to competition in the sector.

ACCC steps in on Qantas-Japan Airlines partnership

The Australian Competition and Consumer Commission has put the kibosh on a new business agreement between Qantas and Japan Airlines.

“The ACCC can only authorise an agreement between competitors if it is satisfied the public benefits would outweigh the harm to competition. The alliance did not pass this test,” ACCC chair Rod Sims said.

The partnership would have seen the two airlines co-ordinate flights between Australia and Japan.

In its decision on the matter, the ACCC raised concerns that it would have allowed both airlines to stop competing on all aspects of price and service for approximately three years.

Prior to the pandemic, the ACCC noted that Qantas and Japan Airlines accounted for approximately 85 per cent of passengers travelling between Australia and Japan.

While the regulator acknowledged the ongoing impacts on the aviation industry, they said that the benefits of long-term competition outweighed any short-term benefits the partnership might deliver.

“We accepted that there was likely to be some short-term benefits from the alliance being able to jointly reinstate services more quickly when borders are reopened, which may initially stimulate tourism,” Mr Sims said.

“However, the longer-term benefits of competition between airlines are cheaper flights and better services for consumers, which is vital to the recovery of tourism over the coming year.”

In addition to suppressing competition between the two parties in the agreement, the ACCC said the arrangement would also make it trickier for other airlines to operate routes between Australia and Japan.

“Airlines have been severely impacted by the pandemic and this has been a very difficult period for them. But preserving competition between airlines is the key to the long-term recovery of the aviation and tourism sectors, once international travel restrictions are eased,” Mr Sims said.

Following the release of the regulator’s draft decision in May, Qantas offered to offset the impact the partnership could have on competition by commencing a new service between Cairns and Tokyo once certain demand thresholds were reached.

In its final ruling, the ACCC did not buy this argument.

“We think Qantas could commence a new Cairns service without the alliance, and the timing of any such service would be best determined by commercial factors in a competitive environment. Jetstar services on this route are currently planned to start again from February 2022, without the alliance,” Mr Sims said.

In a statement, Qantas domestic and international CEO Andrew David said that the airline was disappointed with the decision.

“A closer partnership between Qantas and Japan Airlines would have meant more routes, better flight connections and more benefits to frequent flyers,” Mr David said.

“None of these benefits will be realised following the ACCC’s decision.”

About the author

Fergus is a journalist for Momentum Media's nestegg and Smart Property Investment. He likes to write about money, markets, how innovation is changing the financial landscape and how younger consumers can achieve their goals in unpredictable times.

About the author

Fergus is a journalist for Momentum Media's nestegg and Smart Property Investment. He likes to write about money, markets, how innovation is changing the financial landscape and how younger consumers can achieve their goals in unpredictable times.

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