ACCC plans to deny Qantas and China Eastern coordination

The news: The competition watchdog is poised to stop coordination operations between Qantas and China Eastern Airlines Corporation, saying it may lead to price hikes for travellers. The two airlines are seeking authorisation of an agreement enabling them to coordinate passenger and cargo transport operations between the two countries until March 2024 but the ACCC says the agreement could do more harm than good.

The numbers: Currently China Eastern is the only airline flying direct between Sydney and Shanghai, with Qantas planning to resume flights in late October. The ACCC considers demand for air travel between Australia and China is likely to keep growing between now and the end of March 2024, as Chinese tour groups return and following Tourism Australia's recent campaign in China promoting Australia. The ACCC is seeking submissions in response to the draft determination by 6 October before making its final decision.

The context: The ACCC previously authorised this alliance in 2015 with conditions and in 2021 without conditions due to the exceptional circumstances related to the COVID-19 pandemic, and its associated effects on travel.

What they said: “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,” 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, by limiting or delaying the introduction of additional capacity on the Sydney-Shanghai route as passenger demand continues to grow,” Ms Brakey said.