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- The ACCC is expected to deny coordinated flights between Qantas (QAN) and Japan Airlines under a proposed five-year joint business agreement
- Prior to the COVID-19 pandemic, the two airlines had been the only ones offering direct flights between Melbourne and Tokyo
- As a result, the combination of operations would make it more difficult for another airline to break into that segment of the market
- While the ACCC has been flexible in regulating competitiveness, it does not want to open the door to agreements that harm consumers in the long-term
- Qantas is down 2.49 per cent to $4.69 per share
The ACCC is expected to deny coordinated flights between Qantas (QAN) and Japan Airlines under a proposed five-year joint business agreement.
Prior to the COVID-19 pandemic, the two airlines had been the only ones offering direct flights between Melbourne and Tokyo and were two of three — along with All Nippon Airways — offering direct flights between Sydney and Tokyo.
As a result, the ACCC says the combination of Qantas and Japan Airlines’ operations would make it more difficult for another airline to break into that segment of the market, thereby constituting a breach of competition law.
“The ACCC can only authorise these agreements if the public benefits from the coordination outweigh the harm to competition,” said ACCC Chair Rod Sims.
“At this stage we do not consider that Qantas and Japan Airlines’ proposal passes that test.”
Australia’s airline and tourism sectors took a hefty blow from the COVID-19 pandemic, and the protection of competition in the industry is considered critical to ensuring a swift recovery.
The ACCC said it had been flexible in granting exemptions from competition law during the height of the economic impact, but stressed that those measures shouldn’t open the door to agreements that harm competition in the medium to long-term.
“We took into account that there may be some short-term benefits from the proposed agreement such as allowing Qantas and Japan Airlines to more quickly reinstate flights between Australia and Japan,” Sims continued.
“Our current view is that these are outweighed by the severe harm to competition.”
The ACCC is now seeking feedback in response to the proposed ruling and will make a final decision after those submissions are received.
Qantas is down 2.49 per cent to $4.69 per share at 1:22 pm AEST.
