The Australian consumer watchdog is moving to end a long-standing agreement between Qantas and a state-owned Chinese airline, saying its continuation could lead to travellers being slugged with increased prices.
Qantas is seeking an extension for its alliance with China Eastern Airlines, which allows the two carriers to coordinate flights between Australia and China.
The agreement was first authorised with some conditions by the ACCC in 2015, and then again in 2021 without those conditions due to the "exceptional circumstances" brought about by COVID-19.
However, with tourism between the two nations now increasing and China Eastern the only airline operating direct flights between Sydney and Shanghai, the ACCC is now arguing the extension of the agreement to March 2024 could breach competition laws.
It says it can only authorise the agreement if the public benefits outweigh any detriments to competition.
"At this stage we are not satisfied that the likely harm to competition from Qantas and China Eastern's proposed coordination would be outweighed by any potential benefits," ACCC Commissioner Anna Brakey said.
"We are concerned that the authorisation would provide Qantas and China Eastern with the opportunity and incentive to increase prices, compared to what they would charge absent the alliance, by limiting or delaying the introduction of additional capacity on the Sydney-Shanghai route as passenger demand continues to grow."
Brakey said changing circumstances in the travel industry since its prior authorisations were behind the watchdog's move to block the deal.
"Any additional services on routes other than Sydney-Shanghai could potentially be a public benefit but we are not satisfied they are likely to eventuate between now and March 2024," she said.
"A key difference between now and the previous authorisations is we have not been provided with sufficient evidence that the coordination would lead to additional services on other routes between Australia and China."
The ACCC had granted the two airlines an interim authorisation to continue cooperating in March, which will remain in place for the time being.
It will make a final decision on the matter by October 6.
Friday's move comes just two weeks after the ACCC sued Qantas for allegedly selling tickets to already-cancelled flights.
If successful in that case, the consumer watchdog said it will seek a record penalty of a $600 million fine against the airline.
In a statement to 9news.com.au, Qantas said its partnership with China Eastern had aided millions of customers.
"Qantas notes the ACCC's draft determination to reject extending our joint business with China Eastern," a spokesperson said.
"This tie-up was first approved in 2015 and in that time, millions of customers have benefited from the coordination on flight schedules, frequent flyer programs and streamlined check-in and connections.
"The flow-on benefits for tourism have also been significant.
"We will review the ACCC's draft decision in detail and work to address their concerns ahead of a final determination."
