Australia's competition regulators have denied authorization for Qantas and Japan Airlines (JAL) to form a joint business agreement.

In a decision reached by the Australian Competition and Consumer Commission (ACCC), it found the agreement would “likely lead to reduced competition as international travel resumes, to the detriment of passengers traveling between Australia and Japan.”

The ACCC stated that in the year before the COVID-19 pandemic, both Qantas and Japan Airlines flew a combined 85% of the passengers traveling between Australia and Japan. It further stated both airlines were “each other's closest competitors” on the largest route connecting Sydney and Tokyo. Both carriers are also the only two carriers operating flights on the second largest route between Melbourne and Tokyo.

“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,” said ACCC Chair Rod Sims in a statement.

With its decision, it found that if the ACCC granted authorization to the two airlines for their business agreement, it would make it difficult for other airlines to operate on routes between Australia and Japan. It cited concerns by Virgin Australia which told the ACCC that “it would be more difficult to enter the Australia-Japan route if it is required to compete with Qantas and Japan Airlines acting jointly rather than as dual competing airlines.”

Along with Virgin Australia, Japan's All Nippon Airways (ANA) also operates flights between Australia and Japan.

Qantas and JAL first filed for approval of their joint business agreement in December 2020 to coordinate on their operations between Australia and Japan. Along with coordinating on flight schedules and marketing, the bilateral agreement between both the carriers would have expanded their existing codeshare partnership to cover flights between Australia, Japan, and New Zealand. Qantas also announced plans for a new non-stop flight connecting Cairns in Queensland, Australia to Tokyo.

For Qantas' proposed flights between Cairns and Tokyo, Sims added Qantas could commence the service without the joint business agreement, and the timing of any such service would be best determined by commercial factors in a competitive environment.

Response from Qantas and JAL

In response to the decision by the ACCC, Qantas CEO Andrew David said in a statement: “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.”

David further added how the decision by the ACCC will affect the Australian state of Queensland and the tourist destination of Cairns. “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. 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.”

JAL also pointed to its disappointment, with JAL Executive Officer Ross Leggett saying: “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.”

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