Aviation

Qantas’ tie-up with China Eastern Airlines approved by ACCC

The Australian Competition & Consumer Commission (ACCC) has authorised Qantas and China Eastern Airlines to continue to operate an aviation alliance until 31 March 2023.

The two airlines entered into the original joint coordination agreement (JCA) in 2015 in order to coordinate flights between mainland China and Australia.

The ACCC granted conditional authorisation for Qantas and China Eastern on 21 August 2015, which permitted the alliance until 31 October 2020.

The airlines varied the JCA and were seeking an 18-month re-authorisation to extend the period of is operation to March 2022, given the crisis and market uncertainty created by the COVID-19 pandemic.

Qantas and China Eastern requested that the new authorisation be issued without conditions requiring the maintenance or growth of flight capacity during the authorisation period due to the current coronavirus-affected climate.

The airline’s current intention was to then seek a further extension of the authorisation beyond 2022 in the future, according to the ACCC.

In its final determination delivered late last month, the ACCC said it remains of the view that reduced competition between Qantas and China Eastern on the Sydney-Shanghai route as a result of the proposed JCA extension was likely to result in a “significant public detriment” in times of more normal levels of demand.

“However, the ACCC notes that current demand for flights between Australia and China is low, and there is uncertainty about the extent and timing of a recovery in demand that is likely to occur,” it said.

“Further, it is not apparent that if Qantas and China Eastern were operating independently of each other, there would be sufficient recovery in demand to fuel a strong return to the route for both airlines in the short term.

“As noted, the ACCC considers that the extended JCA will assist Qantas and China Eastern in reinstating services as demand picks up.

“For these reasons, the ACCC considers that the extent of any anti-competitive detriment that is likely to result from the applicants coordinating their operations on the Sydney-Shanghai route, or between Australia and China more broadly, is likely to be limited in the short term.”

“The applicants have sought re-authorisation until 31 March 2022. It now appears that the period of disruption to the aviation industry as a result of the COVID-19 pandemic is likely to be longer than was anticipated at the time the application was lodged.

“It is likely to take longer than originally anticipated for opportunities for travel between Australia and China to return to their pre-pandemic state. Therefore, the ACCC has decided to grant authorisation until 31 March 2023.”

The ACCC granted interim authorisation for Qantas and China Eastern to extend the JCA on 7 September 2020. The watchdog noted that this interim authorisation will remain in place until it is revoked or the date that its final determination comes into effect.


Featured image source: iStock/Warchi



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