Australian Watchdog to Block Qantas-China Eastern Agreement

The Australian Competition and Consumer Commission issued a draft decision proposing to deny authorization for Qantas and China Eastern to coordinate their operations between Australia and China under a joint coordination agreement proposed in November.

"The ACCC considers that the agreement is likely to result in significant public detriment by giving Qantas and China Eastern increased ability and incentive to limit capacity and/or increase airfares on the Sydney-Shanghai route," the watchdog said in a statement.

The commission understands Qantas' desire to form an alliance with a Chinese airline to establish a gateway to Northeast Asia, commission chairman Rod Sims said, but he added there were concerns "they have chosen to do so with their main competitor on the one route between Australia and China on which Qantas operates direct flights."

The two airlines account for more than 80 percent of the seats flown on direct services on the Sydney-Shanghai route and are the only airlines offering daily flights.

Under the agreement, Qantas would be located at China Eastern's terminal in Shanghai, making it easier for Qantas passengers to transfer China Eastern flights. It would also result in cost savings in processing passengers and freight for Qantas and China Eastern.

The commission is seeking submissions from interested parties on the draft determination before making a final decision. Submissions are due by April 8.