The Australian Competition & Consumer Commission (ACCC) has come out in opposition of a proposed joint venture between Qantas Airways and Japan Airlines (JAL).
Its opposition is based on the dominant market share of the two carriers on Japan-Australia routes prior to the outbreak of the coronavirus pandemic, says the ACCC. It contends that such an alliance would hurt competition on air services between the two countries.
“An agreement for coordination between two key competitors breaches competition laws,” says ACCC chair Rod Sims. “The ACCC can only authorise these agreements if the public benefits from the coordination outweigh the harm to competition. At this stage we do not consider that Qantas and Japan Airlines’ proposal passes that test.”
In December 2020, the two Oneworld carriers proposed the alliance, saying it was justified by the parlous state of the airline industry. The proposed joint venture would also encompass New Zealand, and include Qantas low-cost unit Jetstar.
“The airline and tourism sectors have been severely impacted by the COVID-19 pandemic,” says Sims.
“Protecting competition in the airline industry is critical to ensuring recovery in the tourism sector, once international travel restrictions ease. This proposed coordination would appear to undermine competition significantly by reducing the prospect of a strong return to competition on the Melbourne – Tokyo and Sydney – Tokyo routes when international travel resumes.”
In addition, the ACCC contends that the dominance of a Qantas/JAL joint venture on Japan-Australia routes would make it more challenging for other airlines to launch routes between the two countries.
While Sims acknowledged the deep harm wrought on the industry by Covid-19, and noted that that the joint venture would allow the two airlines to more quickly re-establish flights, this benefit would be outweighed by the longer term damage done to competition.
The two airlines had proposed to launch the joint venture in July 2021. Two years prior to this, in July 2019, Cirium schedules data showed that the two carriers provided 139,000 of the 154,000 seats available on Australia-Japan routes, for a 90% market share.
“Granting this authorisation would seem to eliminate any prospect of Qantas and Japan Airlines competing for passengers travelling between Australia and Japan, as they did before the COVID-19 pandemic,” says Sims. “This elimination of competition would benefit the airlines at the expense of consumers,”
The ACCC will accept submissions from interested parties until 27 May, after which a final decision will be made.