ACCC intends to block Qantas and China Eastern Airways partnership extension

The competition regulator says it intends to deny an extension of the Qantas and China Eastern Airways deal, citing concerns about high prices.

ACCC considers that demand for air travel between Australia and China is likely to keep growing.

The consumer watchdog has ­delivered another blow to ­Qantas, proposing to deny the carrier an extension to its eight-year-old partnership with China Eastern Airlines until next March.

Weeks after filing Federal Court action against Qantas over allegations of selling tickets on ­already cancelled flights, the Australian Competition & Consumer Commission flagged concerns about high prices on the Sydney-Shanghai route as a result of the partnership.

China Eastern is the only carrier operating the route, with Qantas due to restart flights ­between Sydney and Shanghai late next month.

In March, the ACCC granted interim authorisation for the partnership to continue while the extension was being considered.

ACCC commissioner Anna Brakey said it was concerned that if Qantas and China Eastern were working together, passengers would face higher fares and ­potentially fewer services than if the airlines were competing.

“At this stage we are not satisfied that the likely harm to competition from Qantas and China Eastern’s proposed co-ordination would be outweighed by any potential benefits,” Ms Brakey said.

The ACCC considered demand for air travel between Australia and China was likely to grow between now and the end of March, as Chinese tour groups ­returned and following Tourism Australia’s recent campaign in China.

A Qantas spokeswoman said the airline had “noted the ACCC’s draft determination to reject the airline’s joint business with China Eastern”.

“This tie-up was first approved in 2015 and in that time, millions of customers have benefited from the co-ordination on flight schedules, frequent flyer programs and streamlined check-in and connections,” she said.

“The flow-on benefits for tourism have also been significant.”

The spokeswoman said Qantas would review the ACCC’s draft decision in detail and work to address its concerns ahead of a final determination, due by the end of November.

Financial analyst Owen Birrell of the Royal Bank of Canada said in the current environment of limited global capacity and heightened ticket pricing there was a risk the ACCC could knock-back other Qantas partnerships for the same reasons. He noted the Qantas-Emirates tie-up was due for renewal in 2028, and American Airlines in 2026.

The draft ruling came after ­another difficult week for ­Qantas, which lost a long-running court battle over its decision to outsource the jobs of almost 1700 workers during the pandemic.

The High Court’s judgment prompted fresh calls from unions for chairman Richard Goyder and the board to leave, or at least explain their role in the outsourcing decision.

It only added to the challenge confronting new Chief executive Officer Vanessa Hudson, with the ACCC also taking legal action over the alleged sale of tickets on already cancelled flights.

Guests at an aviation summit in Brisbane this week were largely sympathetic to Ms Hudson, who kept a low profile in her second week in the job.

Australian Airports Association chief executive James Goodwin said the important thing for Qantas now was “to focus on the future”.

“They need to provide Vanessa Hudson with the necessary support to do her job and sort out what needs to be sorted out,” Mr Goodwin said.

Queensland Deputy Premier Steven Miles said Queenslanders were proud Qantas began in the state and maintained a big footprint there.

“But I guess for every business the most important people are your workers first and customers second. I think that’s where the new CEO should focus,” he said.

Qantas will return to court next week with the ­Transport Workers Union to ­determine an appropriate penalty and compensation for workers whose jobs were unlawfully outsourced.

The ACCC’s case over cancelled flights is also due to have its first hearing in the Federal Court.

Although Qantas is expected to defend the allegations, the airline is yet to file a defence.