- The ACCC will oppose Qantas and China Eastern Airlines’ application to continue coordinating operations between Australia and China.
- The commission is concerned that the coordination would result in increased prices and limited capacity on the Sydney-Shanghai route.
- China Eastern currently operates 15 weekly services between Shanghai and Sydney with ample widebody capacity to add more flights.
In a week of dark news for Australia’s flag carrier, Qantas, the pain continued today when the nation’s competition regulator said it would oppose an application for Qantas and China Eastern Airlines to continue coordinating operations between Australia and China.
More grief for Qantas from the ACCC
The Australian Competition and Consumer Commission (ACCC) announced this morning it would not support the Extended Joint Coordination Agreement for the two airlines and their related entities, including Qantas low-cost subsidiary Jetstar, to continue coordinating operations between Australia and mainland China.
Photo: Steve Worner/Shutterstock
The ACCC had previously authorized this alliance in 2015 with conditions and renewed it in 2021 without conditions due to the exceptional circumstances related to the pandemic and its effects on the travel industry. On March 30, 2023, the commission granted an interim authorization to enable the two airlines to continue their alliance while considering the new application. The airlines have applied for the extension until the end of March 2024.
These agreements between airlines usually contain practices that may breach competition laws, and an ACCC authorization protects the carriers from facing any legal action that may arise from the anti-competitive aspects of the coordination. However, the regulator can only authorize these agreements if the public benefits from the coordination outweigh the harm to competition.
The substantive issue is that currently, China Eastern is the only carrier flying nonstop between Sydney and Shanghai, with Qantas planning to commence services on the route in late October. In its announcement, ACCC Commissioner Anna Brakey justified the decision by stating:
“At this stage we are not satisfied that the likely harm to competition from Qantas and China Eastern’s proposed coordination would be outweighed by any potential benefits.
“We are concerned that the authorisation would provide Qantas and China Eastern with the opportunity and incentive to increase prices, compared to what they would charge absent the alliance, by limiting or delaying the introduction of additional capacity on the Sydney-Shanghai route as passengers demand continues to grow.”
There is plenty of widebody capacity at China Eastern
According to Flightradar24.com, China Eastern operates 15 services weekly between Shanghai and Sydney with a mix of Airbus A350 and A330 aircraft. On Wednesday this week, the daily MU561 departed Shanghai Pudong International (PVG) at 21:02 and, after a 10:17 hour flight, landed at Sydney Kingsford Smith Airport at 09:19 on Thursday.
The aircraft, a 2019 Airbus A350-900, registration B30-6Y with MSN 272, departed Sydney at 11:42 and landed back at Shanghai Pudong at 19:28. The Flightradar24.com data shows China Eastern has 18 A350-900s, 30 A330-200s, 25 A330-300s and 20 Boeing 777-300ERs and four 787-9s.
Photo: Markus Mainka / Shutterstock
The ACCC believes that demand for air travel between Australia and China will continue to grow until the end of March 2024 due to Chinese tour groups returning and the impacts of marketing programs in China by Tourism Australia. It also said that while additional services on any route other than Sydney-Shanghai could potentially be a public benefit, it’s not satisfied that’s likely to happen between now and the end of March 2024.
That’s not the end of the issue for Qantas and China Eastern, as the ACCC has called for submissions from interested parties to be lodged by October 6, 2023. The commission will then consider the response, which will undoubtedly include something from Qantas and China Eastern, with a final determination due in November.
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