ACCC grants Qantas, Emirates alliance conditional approval

By a staff reporter, with AAP

The Australian Competition and Consumer Commission has granted conditional authorisation to an alliance between Qantas Airways Ltd and Emirates until March 31, 2018.

In a statement, chairman of the consumer watchdog Rod Sims said the alliance is likely to benefit the public through enhanced products and service offerings by the airlines, and improved operating efficiency.

“In particular, the alliance is likely to provide Qantas and Emirates customers with increased access to a large number of existing frequencies and destinations under a single airline code, improved connectivity and scheduling, and access to each alliance partner’s frequent flyer programs,"he said.

"The alliance is also likely to provide the airlines with increased flexibility to manage their fleet.

“Taking all of this together, the ACCC is satisfied that the alliance is likely to result in material, but not substantial, public benefits.”

The alliance is a key plank in Qantas chief executive Alan Joyce's bid to return the Flying Kangaroo's international operations, which lost $450 million last financial year, to profitability.

The alliance will involve coordination of the airlines’ passenger and cargo transport operations and other related services. 

The consumer watchdog believed the alliance was likely to have detrimental effect on competition in regions where Qantas and Emirates currently offer competing air passenger and cargo transport services.

However, it said in most of these regions there were identifiable competitive constraints which meant detriments were likely to be minimal.

“The one exception is the trans-Tasman where Qantas and Emirates compete on four routes which accounted for around 65 per cent of total passenger capacity between Australia and New Zealand in the year to June 30, 2012," Mr Sims said.

"On these routes, the ACCC is concerned that Qantas and Emirates will have the ability and incentive to reduce or limit growth in capacity in order to raise airfares.” 

To address the concern, the ACCC imposed a condition of authorisation on its approval which requires the airlines to maintain at least their pre-alliance aggregated capacity on the four overlapping trans-Tasman routes, subject to a review considering whether increases in the minimum required capacity are warranted. 

The consumer watchdog said, with this condition met, it is satisfied that the relevant net public benefit tests are met.

“The ACCC has assessed the public benefits and detriments of the alliance on the basis that the scope of Qantas’ international operations in the likely future without the alliance is not materially different to the likely future with the alliance," Mr Sims said.

"In particular, the ACCC does not accept or rely on the claim that Qantas International is in “terminal decline” and unable to compete effectively or operate profitably absent the alliance.”

Qantas and Emirates also plan to cooperate on sales, marketing and pricing.

The alliance was a key plank in Qantas chief executive Alan Joyce's bid to return the Flying Kangaroo's international operations to profitability.

Under the partnership, Qantas will use Dubai, rather than Singapore, as the carrier's stopover point for its flights to London.

The first Qantas flight to London via Dubai departs on March 31.

The global alliance will also allow Qantas to sell more than 30 one-stop destinations in Europe, as well as points in the Middle East and North Africa, and coordinate on sales, marketing and pricing with Dubai-based Emirates.

Investors responded well to the approval. Qantas shares were 3.25 cents higher at $1.7525 at 1520 AEDT.

Airlines welcome approval

Qantas chief executive Alan Joyce said the decision was great news for Australian travellers and local tourism, as well as the airline itself.

“Qantas is an Australian icon and the future of its international business is much brighter with this partnership,” he said.

“Customers are already responding very strongly to the joint network that Qantas and Emirates have built, and to the frequent flyer benefits that extend across it, with a significant increase in bookings.” 

Meanwhile, Emirates president Tim Clark said the partnership was "truly game-changing" as it brought together "two of the world’s best airlines and offers some of the highest quality travel experiences".  

“Dubai is a leading global hub and through it, our two airlines will connect Australia to Europe, the UK and Northern Africa more smoothly than ever before,” Mr Clark said.
Unions and Independent Senator Nick Xenophon had attacked the tie-up ahead of the ACCC's decision, arguing it was bad for the travelling public, the economy and Qantas staff.
But Transport Minister Anthony Albanese believes the alliance will lead to cheaper fares, reduced travel times, and more tourists visiting regional Australia.
"The Flying Kangaroo has a special place in the heart of all Australians and this is good news for Australian travellers and the Australian economy," he said.