The ACCC has revealed that it is proposing to deny Qantas and Japan Airlines permission to coordinate flights and fares when international travel resumes.
Commission Chairman Rod Sims said the deal would “significantly undermine competition” as it would make it too difficult for another airline to challenge on routes where the pair currently have few rivals.
Australian Aviation reported in December how the two airlines wanted to launch a new business in July that would include an expanded codeshare relationship, additional flights, new routes and a pricing collaboration.
In a statement released Thursday, Sims said he proposed to deny permission and requested submission of interested responses by the end of the month before a final decision is made.
âA coordination agreement between two key competitors violates competition laws. The ACCC can only authorize these agreements if the public benefit from the coordination outweighs the harm to competition, âsaid Sims.
âAt this point, we do not consider the Qantas and Japan Airlines proposal to pass this test.
âBefore the COVID-19 pandemic, Qantas and Japan Airlines were the only two airlines offering direct flights between Melbourne and Tokyo. They were also two of only three airlines, the other being All Nippon Airways, offering direct flights between Sydney and Tokyo.
âThe air transport and tourism sectors have been severely affected by the COVID-19 pandemic. Protecting competition in the airline industry is essential to ensure the recovery of the tourism sector, once restrictions on international travel are relaxed.
âThis coordination proposal would appear to significantly undermine competition by reducing the prospect of a strong return to competition on the Melbourne-Tokyo and Sydney-Tokyo routes when international travel resumes.
âGranting this clearance appears to eliminate any prospect of competition between Qantas and Japan Airlines for passengers traveling between Australia and Japan, as they did before the COVID-19 pandemic. This elimination of competition would benefit airlines to the detriment of consumers.
âWe took into account that there could be short-term benefits of the proposed deal, such as allowing Qantas and Japan Airlines to restore flights between Australia and Japan more quickly. Our current view is that these are outweighed by the serious damage to competition.
âWe have been prepared to be flexible in granting limited exemptions from competition law during this time of severe economic impact on the travel industry due to COVID-19. However, we need to make sure that this does not open the door to anti-competitive agreements that significantly harm competition in the medium and long term.
The news will be a blow to Qantas, given the federal government has repeatedly hinted that Japan may be one of the first countries Australia opens up in a travel bubble. The agreement was due to come into effect in July.
Qantas and Japan Airlines hoped the move would:
- An expanded codeshare relationship and optimized schedules on flights between Australia and New Zealand and Japan;
- Enhanced frequent flyer benefits for Qantas and JAL customers, including better earning of Qantas points or JAL miles on routes;
- Qantas customers will have access to 14 new codeshare destinations in Japan and JAL customers will have access to 15 new codeshare destinations in Australia and New Zealand; and
- Coordination of pricing, schedules, sales and tourism marketing.
Qantas Managing Director Alan Joyce said, âAbout half a million people visited Australia from Japan in 2019. We want tourism to pick up and grow even more by making it easier for Japanese travelers to visit.
“It will be a victory for our customers, a victory for the business and a victory for the million people who work in tourism across Australia.”
Currently, only Australian citizens and permanent residents are allowed to enter the country, with international students, temporary visa holders and tourists being banned completely.
Those who enter are subject to a mandatory 14-day quarantine period for which they must pay up to $ 3,000.