Qantas says it will cancel plans to launch a new service from Cairns to Tokyo after the competition watchdog blocked its proposed alliance with Japan Airlines over concerns it would make a close to a monopoly on flights between the two countries.
The Australian Competition and Consumer Commission (ACCC) on Monday denied an application from the two airlines to organize flights pricing, timetables, sales, and tourism marketing because it would hamper contenders like Virgin Australia and result in higher airfares.
The Australian Competition and Consumer Commission (ACCC) has denied the joint business agreement between Qantas Airways and Japan Airlines Co Ltd (JAL) to organize flights between the two countries on worries of reduced competition.
As per the watchdog, the authorization would eliminate competition between JAL and Qantas, yet would likewise make it hard for different airlines like Virgin Australia to work on routes between Australia and Japan.
Furthermore, the agreement would have permitted the airlines to quit contending on all aspects of cost and service for three years, stated the regulator.
Qantas, its budget arm Jetstar, and Japan Airlines (JAL) carried around 85% of traveler traffic between the two countries before the pandemic. They were the nearest competitors on the Sydney-Tokyo route and the only airlines on the Melbourne to Tokyo route.
ACCC chairman Rod Sims said the tie-up would make a “near monopoly” on air travel between Australia and Japan, which offset the advantages of the alliance serving to rapidly reestablish travel when borders resume.
“It would mean higher prices than otherwise; it would mean reduced service, as you always get when you head towards monopoly,” he said. “It was too much competitive harm.”
The alliance would likewise make it harder for different airlines attempting to contend or launch new services onto the route. Virgin had planned to begin traveling to Japan before the pandemic pushed it into administration.
Qantas said it was disappointed with the decision to dismiss the alliance, which it said would have delivered more routes, better flight connections, and more noteworthy advantages for frequent flyers.
“This is particularly unfortunate for Queensland and Cairns, which would have benefited from a direct Qantas route to Tokyo that would have seen a lot of travelers wanting a premium experience,” Qantas domestic and international CEO Andrew David said.
“Without being able to coordinate with [Japan Airlines]… the planned flights between Cairns and Tokyo are just not commercially viable.”
Mr. David said that the travel and tourism recovery from COVID-19 would be “slow and bumpy”, and that getting policy settings right was critical as carriers basically remake key routes without any preparation.
“Getting that right will ultimately benefit the recovery of the Australian economy,” he said.
In any case, Mr. Sims believed the Cairns-Tokyo service would be commercially feasible without the alliance, and said that making an air travel monopoly would prevent, not help, the travel and tourism industry’s recovery.
“Once people get vaccinated there’ll be plenty of people wanting to resume international travel and what they won’t want is to face higher prices and have reduced choice,” Mr. Sims said.
The ACCC has granted a few exceptions to Australia’s domestic airlines to facilitate their timetables or in any case cooperate during the pandemic, which has devastated demand for air travel.
At 3 pm, Qantas shares were trading 3¢ lower at $5.29. The stock was at $7 in mid-2020 and dropped to $2.14 in March 2020 when COVID-19 carried global air travel to a standstill.
Last December, Qantas, and JAL applied for a three-year authorization of a joint business agreement to completely arrange their air traveler and cargo operations between Australia and Japan.
The agreement would empower them to cooperate on marketing, sales, pricing, scheduling, distribution methodologies as well as agency arrangements.
It would likewise cover inventory management and frequent flyer programs, lounges, joint procurement, product and service standards, and cargo.
The two transporters represented almost 85% of travelers traveling between Australia and Japan, in the year before the pandemic.
ACCC Chair Rod Sims said: “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.
“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.”