Qantas and China Eastern have landed a new heavyweight submission with the Australian Competition and Consumer Commission (ACCC), arguing that if the regulator goes ahead and rejects the two airlines’ proposed alliance, it could greatly damage Qantas operations in China.
That, in turn, would damage Australian tourism and trade, the submission maintains.
Tourism bodies, including lobby groups, an airport, state authorities and a major pilots’ association, have already urged the ACCC to do a U-turn and approve the proposed deeper alliance between Qantas and Shanghai-based China Eastern. See: Tourism industry swings behind Qantas/China Eastern
The ACCC has signalled it will block the alliance. In a draft decision in March, the ACCC said it proposed to deny authorisation for Qantas and China Eastern to coordinate their operations between Australia and China under a proposed Joint Coordination Agreement.
The new submission, bolstered with a CAPA Centre for Aviation analysis, argues that the proposed alliance “needs to be assessed in the context of global and regional competitive dynamics rather than a narrow, isolated focus on a single route”.
It claims the ACCC has failed to appreciate the degree of competitive constraint imposed on the applicants by carriers serving the Australia-China market via other hubs within and outside China.
It accuses the ACCC of having particularly underestimated the “vigorous and effective competition provided by carriers operating indirect services on the Sydney-Shanghai route, including Cathay Pacific and Singapore Airlines”.
It states: “The Commission identified the relevant area of competition for the purpose of assessing the Proposed Conduct as the international air passenger transport services between Australia and China.
“However, the Commission’s subsequent focus on the single area of overlap between the Applicants represents an overly narrow approach that does not sufficiently take into account the broader dynamics of the area of competition identified.
“The Proposed Conduct needs to be viewed in light of Australia’s relationship with China more broadly, given the flow-on effects of facilitating an ongoing Qantas presence in China and expansion by China Eastern to Australia.
“The Proposed Conduct will not result in a lessening of competition in any market however defined, given the competitive dynamics and economic realities of the global aviation industry in which that conduct is proposed to take place.”
Qantas chief executive Alan Joyce told the Australian newspaper yesterday the partnership would bring benefits to consumers and the airlines.
“The whole intention of this partnership is to grow, that’s what we’re aiming to do,’’ he said.
Written by Peter Needham