Competition watchdog rejects Qantas-Japan Airlines deal as detrimental

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September 13, 2021
Japan Airlines qantas
Photo: Valentin Hinikka.Finland/Wikicommons Media.

Australia’s competition watchdog has rejected an alliance between Qantas and Japan Airlines that would allow them to fix fares as detrimental to passengers.

The oneworld alliance partners had asked the Australian Competition and Consumer Commission to approve the joint business agreement for three years but with plans to extend it.

Prior to COVID-19, the airlines had flown about 85 percent of passengers on the Australia-Japan route and had competed on the busy Sydney-Tokyo route and were the only carriers operating on Melbourne-Tokyo.

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But the ACCC confirmed its view that the agreement would likely lead to reduced competition as international travel resumes, to the detriment of passengers traveling between Australia and Japan.

It also concluded it would make it difficult for other airlines to start flights between Australia and Japan.

Virgin Australia, which does not currently operate long-haul international services, told the commission it would be more difficult to enter the Australia-Japan route if it faced the combined might of Japan Airlines (JAL) and Qantas.

“The ACCC can only authorize an agreement between competitors if it is satisfied the public benefits would outweigh the harm to competition. The alliance did not pass this test,” ACCC chair Rod Sims said.

“Airlines have been severely impacted by the pandemic and this has been a very difficult period for them. But preserving competition between airlines is the key to the long-term recovery of the aviation and tourism sectors, once international travel restrictions are eased.”

“We accepted that there was likely to be some short-term benefits from the alliance being able to jointly reinstate services more quickly when borders are reopened, which may initially stimulate tourism.

“However, the longer-term benefits of competition between airlines are cheaper flights and better services for consumers, which is vital to the recovery of tourism over the coming years.”

Qantas had offered a carrot of a new mainline service between Cairns and Tokyo once demand picked and if the alliance was approved.

But Sims said the commission believed Qantas could start the service without the alliance and noted Jetstar services were due to restart from February 2022.

Qantas and JAL  said they were disappointed by the decision which would have ensured a faster and sustained recovery from COVID.

In addition to the new Cairns-Tokyo Qantas service, they said the agreement would have provided an expanded codeshare arrangement to up to 29 flight destinations, better flight schedules and enhanced frequent flyer benefits.

“None of these benefits will be realized following the ACCC’s decision.,’’ said Qantas International chief Andrew David.

“We know the recovery of international travel is going to be slow and bumpy.

“It will take years for the whole travel and tourism industry to fully recover from COVID, so getting the policy settings right is going to be critical as key routes are rebuilt essentially from scratch”

David said the Qantas Tokyo-Cairns flight was not commercially viable without the ability to coordinate with JAL and use its extensive marketing reach in Japan to draw Japanese tourists to northern Queensland.

JAL executive officer Ross Leggett said the alliance would have accelerated leisure and business travel between Japan and Australia “with clear economic and social benefits” to both.