The competition regulator intends to spike a proposed tie-up between Qantas and Japan Airlines over concerns the partnership would lead to higher airfares and worse service for travellers.
The Australian Competition and Consumer Commission (ACCC) said on Thursday it planned to block the agreement, which would allow Qantas and Japan Airlines (JAL) to sell fares on each other’s flights and coordinate on ticket pricing, flight schedules and marketing.
Qantas said the agreement would help re-establish air routes between Australia and Japan following COVID-19 but the ACCC found any benefits were outweighed by the harm to the travelling public.
“Here’s the number-one airline of each country wanting to get together,” said ACCC chair Rod Sims. “It’s a significant reduction in competition.”
Before the COVID-19 pandemic brought international travel to a standstill, Qantas and JAL were the only two airlines flying non-stop between Melbourne and Tokyo and they only had one competitor on flights between Sydney and Tokyo (All Nippon Airways).
“That would have a detrimental impact on how much you pay for a flight, the timeliness of the flight and the service quality of the flight,” Mr Sims said.
Qantas said it was disappointed with the ACCC’s draft finding and would try to change the regulator’s mind before it makes its final decision.
“Not only would this partnership be good for our business, it would be good for consumers and help key parts of the tourism industry recover,” a Qantas spokesman said.
“The international market will look very different post-COVID and close collaboration between partner airlines is going to be critical over the next few years as key routes are rebuilt.”
The ACCC initially blocked a Qantas-China Eastern Airlines joint venture in 2015 but successfully argued that travellers between Australia and China were served by a number of different airlines and routes. In March the ACCC renewed Qantas’ alliance with American Airlines for another five years.
Virgin Australia had intended to launch flights from Brisbane to Tokyo in partnership with ANA just before the COVID-19 pandemic unfolded last year, which pushed the carrier into administration.
Virgin has offloaded its wide-body jets and it is not clear when it will seek to resume long-haul flying, however it is trying to hold onto its landing slots at Tokyo’s Haneda Airport.
Mr Sims also said in an interview that he was looking seriously at complaints from capital-city market newcomer Regional Express that Qantas and Virgin were trying to crush it by dumping capacity on domestic and regional routes.
“We’re not jumping to conclusions... [but] if an airline enters a route and you can’t see how they’re covering their cash costs at all, then I think there’s questions to be answered,” he said. “We’re looking at a couple of those and we’re posing questions.”
At 3.09pm, Qantas shares were trading 1.6 per cent lower at $4.74.
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