ACCC releases draft proposal to nix Qantas-China Eastern Airlines pact

The consumer watchdog will seek to block Qantas from continuing to co-ordinate flights to and from mainland China with an international airline as pressure mounts on the embattled flying kangaroo.

The Australian Consumer and Competition Commission issued a draft determination on Friday seeking to block the agreement between Qantas, and its subsidiary Jetstar, and China Eastern Airlines.

The agreement enabled the two airlines to co-ordinate passenger and cargo transport operations between Australia and China until March 2024 but, according to the ACCC, could possibly breach competition laws.

The ACCC said China Eastern, which is majority owned by the Chinese government, is the only airline flying direct between Sydney and Shanghai, with Qantas planning to resume flights in late October.

“At this stage we are not satisfied that the likely harm to competition from Qantas and China Eastern’s proposed co-ordination would be outweighed by any potential benefits,” ACCC commissioner Anna Brakey said.

“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.”

Ms Brakey said the two airlines could limit or delay the introduction of additional capacity on the Sydney-Shanghai route as passenger demand continues to grow as Chinese tour groups return to the country.

“Any additional services on routes other than Sydney-Shanghai could potentially be a public benefit, but we are not satisfied they are likely to eventuate between now and March 2024,” Ms Brakey said.

“A key difference between now and the previous authorisations is we have not been provided with sufficient evidence that the co-ordination would lead to additional services on other routes between Australia and China.”

In March, the ACCC granted interim authorisation to enable Qantas and China Eastern to continue to co-ordinate their operations while the ACCC assessed their substantive application for reauthorisation.

That interim authorisation remains in place and Qantas and China Eastern have been invited by the ACCC to make submissions to the watchdog on a transition to end authorisation of the agreement between the airlines.

The ruling comes as Qantas faces mounting scrutiny over past and present policies, including from the ACCC, which launched legal action last month after the airline allegedly advertised flights that had already been cancelled.

In a statement, a Qantas spokesman said the airline would review the ACCC’s draft decision in detail and would work to address the watchdog’s concerns ahead of a final determination later this year.

“This tie-up was first approved in 2015 and in that time millions of customers have benefited from the co-ordination on flight schedules, frequent flyer programs and streamlined check-in and connections,” the spokesman said.

“The flow-on benefits for tourism have also been significant.”