Australian competition watchdog denies Qantas/JAL JBA

The Australian Competition and Consumer Commission (ACCC) has rejected a proposed joint business agreement between Qantas (QF, Sydney Kingsford Smith) and JAL – Japan Airlines (JL, Tokyo Haneda), having found that the airlines would have too big a market share.

The ACCC can only authorise an agreement between competitors if it is satisfied the public benefits would outweigh any harm to the competition. “The alliance did not pass this test,” ACCC Chair Rod Sims said.

The watchdog said the proposed JBA would likely lead to reduced competition and thus harm passengers. While it admitted that the partnership could accelerate market recovery in the wake of the COVID-19, it assessed the proposal with a long-term view.

“We accepted that there was likely to be some short-term benefits from the alliance being able to jointly reinstate services more quickly when borders are reopened, which may initially stimulate tourism. However, the longer-term benefits of competition between airlines are cheaper flights and better services for consumers, which is vital to the recovery of tourism over the coming years,” Sims said.

The ACCC underlined that before the COVID-19 pandemic, Qantas and JAL jointly had an 85% market share on routes between Australia and Japan. It agreed with the objection raised by Virgin Australia, which argued that the partnership between its two main competitors would make it much more difficult to add new routes to Japan.

After the ACCC tentatively denied the JBA in May 2021, Qantas tried to sway its opinion by pledging to add more capacity to Japan and launch a new route from Cairns. However, the regulator pointed out that contrary to Qantas’s agreement, it had added routes to Japan even without the JBA.

“We think Qantas could commence a new Cairns service without the alliance, and the timing of any such service would be best determined by commercial factors in a competitive environment. Jetstar Airways services on this route are currently planned to start again from February 2022, without the alliance,” Sims said.

The Australia-Japan market remains practically closed for the time being due to severe entry restrictions imposed by Australia. The ch-aviation schedules module shows that JAL and ANA – All Nippon Airways currently operate three and one weekly scheduled service between the countries, respectively, although only for repatriation and essential travel. Qantas flies 3x weekly to Japan using passenger A330-300s but as cargo-only flights.