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aviation

Dec 20, 2012

ACCC cuts aspects of Qantas-Emirates plan

ACCC not fully convinced of merits of Qantas-Emirates tie-up in its proposal to grant conditional authorisation of the alliance

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The ACCC has proposed to grant conditional authorisation of the Qantas-Emirates business partnership but has cut its proposed initial operation from 10 to 5 years, and will restrict its application on routes to New Zealand.

It also says the alliance is likely to be of material although not substantial benefit to consumers.

This is its statement:

The cutting of the initial lifetime of the partnership from 10 to 5 years will mean it will come up for renewal several years after Qantas has promised to restore its long haul international full service operation to profitability.

The ACCC glides politely over the fact that Qantas is exiting in its own right the Perth, Adelaide and Brisbane to Europe markets in favour of Emirates by pointing out in its statement that while there are detrimental effects in some overlapping markets there will be an increased competitive response from other airlines.

This is nevertheless acknowledgment by the ACCC that some consumers will lose the opportunity to fly Qantas in so far as Qantas will seek to sell those customers code shared seats on Emirates aircraft.

On television this morning ACCC chairman Rod Sims explained that the restrictions it would impose on the partnership across the Tasman were to prevent either Emirates or Qantas reducing their current capacity between Australia and New Zealand, thus reducing competition.

(Comment: This is arguably not what Virgin Australia or its trans Tasman alliance partner Air New Zealand might have wished for, since their position is that there are too many seats chasing too few customers.)

ACCC chairman Sims said: “We found that while the benefits of the partnership between Qantas and Emirates would not be large to consumers there would not be any real detriment to consumers because of the level of competition from other carriers.”

Sims also said “This is a serious tie-up between two major competitors on the routes to Europe….Our original concern was that Emirates might lift its fares to match those charged by Qantas … but there are just too many competitors for this to happen…If it did lift its fares people would have ample opportunity to make other choices.”

He said that the concern of the ACCC in applications like this was not about the profitability of a particular airline more than it was about the commission’s concern as to the consumer and tourism industry benefits of continued and increased competition.

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