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Qantas-Japan Airlines joint business plan blocked by Australia’s Competition Commission

The Australian Competition and Consumer Commission (ACCC) has blocked plans for a joint business between Qantas and Japan Airlines, stating that the agreement was “not in the public interest”.

The airlines had sought approval from the ACCC in December 2020 to work more closely together and form a joint business for routes between Japan and Australia / New Zealand.

But the ACCC has denied authorisation for the tie-up, stating that the agreement “would likely lead to reduced competition as international travel resumes, to the detriment of passengers travelling between Australia and Japan”.

Rod Sims, Chairman, ACCC, said:

The ACCC can only authorise 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.

The ACCC concluded that granting the authorisation “would not only remove competition between Qantas and Japan Airlines, it would make it very difficult for other airlines to operate on routes between Australia and Japan”.

As part of the agreement, the airlines had proposed:

  • An expanded codeshare relationship to up to 29 destinations and better flight schedules between Australia, New Zealand and Japan.
  • Nonstop flights between Cairns and Tokyo operated by Qantas
  • Coordination of pricing, schedules, sales and tourism marketing supporting growth in key tourism markets.
  • Enhanced frequent flyer benefits and more premium travel opportunities for Qantas and JAL customers.

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Andrew David, CEO, Domestic and International, Qantas, said:

We’re obviously disappointed with this decision. A closer partnership between Qantas and Japan Airlines would have meant more routes, better flight connections and more benefits to frequent flyers. None of these benefits will be realised following the ACCC’s decision. 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. Getting that right will ultimately benefit the recovery of the Australian economy.

He added:

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 travellers wanting a premium experience. Without being able to coordinate with JAL, and in particular to draw Japanese tourists into northern Queensland using JAL’s extensive marketing reach in Japan, the planned flights between Cairns and Tokyo are just not commercially viable for Qantas. We explained that dynamic to the ACCC at length, and we disagree with their assessment that the route is viable without the alliance.

Qantas and JAL will continue their existing codeshare and oneworld partnership, which do not provide the same benefits than would have been possible under a joint business. Qantas and JAL have been partners in Jetstar Japan, one of the largest domestic low cost carriers in Japan, since 2012.

Ross Leggett, Executive Officer, Senior Vice President (Route Marketing, International Relations & Alliances), Japan Airlines, said:

Japan Airlines is also truly disappointed with the ACCC’s decision to disapprove our proposed joint business. We especially believed that the joint business with Qantas would have accelerated the recovery of Leisure and Business traffic between Japan and Australia, with clear economic and social benefits to both countries in the extremely challenging environment precipitated by the COVID-19 pandemic. It is unfortunate that the opportunity to provide enhanced customer choice and extensive travel industry growth opportunities will not be realized.

Meanwhile, Qantas has announced the resumption of flights to Proserpine for the first time in seven years and has also announced a significant domestic expansion including deploying its Boeing B787 Dreamliners on some domestic routes. The airline has resumed flights to Burnie too and will require all of its employees to be fully vaccinated against COVID-19. Qantas is rewarding its Australian Frequent Flyers who are fully vaccinated in order to support vaccination and has outlined strategy for resumption of international flights.

What do you think of Australia’s Competition Commission decision to block the joint business plan between Qantas and Japan Airlines? Let me know in the comments section below.

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