China Eastern has said it will double the number of flights between its Shanghai hub and Sydney and Melbourne by November – provided its proposed alliance with Qantas Airways is approved.
The move is aimed at helping alleviate concerns expressed by the Australian Competition and Consumer Commission (ACCC).
After the ACCC issued a draft determination in March proposing to reject the proposed joint venture (on the basis that the two carriers would have an incentive to lift prices or cut services on the Sydney-Shanghai route) a raft of submissions from all sorts of tourism and travel related sources has flooded in, asking the ACCC to reconsider.
Tourism bodies, including lobby groups, an airport, state authorities and a major pilots’ association, have urged the ACCC to do a U-turn and approve the proposed deeper alliance between Qantas and Shanghai-based China Eastern.
Qantas says the proposed venture would:
- Strengthen Shanghai as a hub and increase passenger traffic flows in both directions;
- Enable and expedite capacity increases on new and existing routes;
- Deliver shorter journey times, improved connectivity and destination choice for passengers flying between Australia and China;
- Improve schedule spread and associated connectivity;
- Expand the destinations covered by the codeshare arrangements, while incentivising both carriers to sell more on each other’s services through a greater range of price points;
- Provide greater flexibility and certainty for Australian businesses who, pursuant to free trade arrangements, have increasing need to access trade and export opportunities in both Shanghai and secondary cities in China;
- Significantly boost inbound Chinese tourism by expanding Qantas’ brand awareness and distribution capability throughout China and by making it easier for more tourists from more areas of China to visit and spend time and money in more parts of Australia;
- Result in improved products and services for customers travelling through Shanghai as a result of improved lounge facilities and coordinated customer service;
- Provide enhanced benefits for members of both applicants’ frequent flyer programs, particularly through increased earning and redemption opportunities;
- Help ensure the financial viability of Qantas’ operations in China, preserving and extending the only Australian carrier’s presence in China;
- Expedite and sustain the growth of China Eastern in Australia, leading to further employment in Australia and other economic benefits; and
- Provoke a pro-competitive response from rival carriers and hubs in the region.
Such benefits would not be possible if the application were denied, Qantas argues.
If China Eastern and Qantas were banned from going ahead with their deal, Qantas says the two airlines would have no commercial incentive to:
- Share the risk and expedite sustainable capacity expansion to Australia;
- Expand the range of destinations to which the codeshare applies;
expand the range of inventory available for sale to the other carrier;
- Work together to improve connectivity and schedule choice;
co-locate terminals in Shanghai;
- Enhance reciprocal frequent flyer benefits and improve access to redemption opportunities;
- Leverage sales and distribution opportunities to maximise brand and service awareness in each other’s home markets;
- China Eastern has less incentive to direct and expedite fleet expansion to Australian routes; and
- Qantas becomes increasingly marginalised on Australia-China routes, making its operations less sustainable.
Written by Peter Needham