ACCC delivers setback for Qantas on Japan routes

The ACCC fears a Qantas proposal to partner with Japan Airlines would lessen competition on Tokyo routes.

The ACCC says it plans to reject a partnership between Qantas and Japan Airlines because it could lessen competition on Tokyo routes. Picture: AFP

The competition watchdog has flagged its intention to reject a planned partnership between Qantas and Japan Airlines (JAL) because it is unlikely to benefit consumers.

The two carriers had applied to co-ordinate flights between Australia and Japan under a five-year joint business agreement.

In a draft decision, the Australian Competition and Consumer Commission said it would only authorise such a deal if the public benefit outweighed the harm to competition.

“At this stage we do not consider that Qantas and Japan Airlines’ proposal passes that test,” said ACCC chairman Rod Sims.

“Granting this authorisation would seem to eliminate any prospect of Qantas and JAL competing for passengers travelling between Australia and Japan, as they did before the COVID-19 pandemic.

“This elimination of competition would benefit the airlines at the expense of consumers.”

Mr Sims made the point that before the COVID crisis, Qantas and JAL were the only two airlines offering direct flights between Melbourne and Tokyo, and were two of only three offering direct flights between Sydney and Tokyo.

“Protecting competition in the airline industry is critical to ensuring recovery in the tourism sector, once international travel restrictions ease,” Mr Sims said.

“This proposed co-ordination 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.”

A Qantas spokesman said the airline was disappointed with the negative draft decision.

He said the partnership would be good for consumers by providing greater choice of flights, more options for frequent flyers, and the return of direct Qantas flights between Cairns and Japan.

“The international market will look very different post-COVID and close collaboration

between partner airlines is going to be critical over the next few years as key routes are

rebuilt,” the spokesman said.

“It’s our job to convince the ACCC of the merits of this partnership ahead of their final

determination. We’ll review their draft decision closely and respond to their concerns, as

we’ve done in the past.”

Earlier this year, the ACCC approved an agreement between Qantas and American Airlines but Mr Sims said that was a very different situation.

“There’s certainly another player on that market that’s substantive, which you’d naturally fly with whereas here the obvious two airlines to fly with between Australia and Japan are Qantas and Japan Airlines so that does raise a very significant issue for us,” said Mr Sims.

Submissions in response to the draft decision were being sought by the ACCC by May 27, ahead of a final ruling.

In 2015, Qantas managed to change the ACCC’s mind when the commission indicated it would refuse a partnership with China Eastern Airlines.

Qantas remains hopeful of restarting international flights at the end of October and it was expected the ruling would be made by then.