Australian watchdog to block Qantas-China Eastern agreement

AP News
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Posted: Mar 24, 2015 12:26 AM

CANBERRA, Australia (AP) — Australia's competition watchdog said Tuesday it was leaning toward blocking a tie up between Qantas Airways and China Eastern Airlines because it could increase fares on the popular Sydney-Shanghai route.

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

The watchdog said in a statement that the tie-up could result in "significant public detriment" by giving Qantas and China Eastern increased ability and incentive to limit capacity and increase airfares on the Sydney-Shanghai route.

Commission chairman Rod Sims said the regulator understands the commercial reasons for the alliance, as Qantas wants to establish a gateway to Northeast Asia, but is concerned the two airlines have chosen to do so with their main competitor on the route.

Qantas and China Eastern account for more than 80 percent of the seats on direct flights between Sydney and Shanghai and are the only airlines offering daily flights.

Under the agreement, Qantas would use China Eastern's terminal in Shanghai, making it easier for Qantas passengers to transfer to connecting 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 on the draft determination before making a final decision. Submissions are due by April 8.