On 20 December 2012, the ACCC issued a draft decision proposing to grant authorisation for the alliance between Qantas and Emirates. The draft decision proposes authorisation for a 5 year period, subject to a condition that the parties cannot cooperate on the trans-Tasman route.
The ACCC will conduct further public consultation based on the content of the draft decision. The ACCC’s preliminary view is that while the alliance may give rise to some public detriments as a result of reduced competition in regions where both parties currently operate, the potential public benefits flowing from the alliance are likely to outweigh those detriments and result in a net public benefit.
The public benefits which the Commission considers are likely to arise include:
- cost savings and other efficiencies;
- aggressive competition from rival airline operators predominantly on routes between Australia and the UK/Europe;
- increased tourism and trade in Australia; and
- improved crisis management response.
A concern raised by the ACCC, which will underpin a condition likely to be imposed in the authorisation, is that jointly the parties would have the ability or incentive to reduce or restrict capacity growth in order to increase the prices of airfares on the trans-Tasman routes. The parties would have a combined share of approximately 65% of the total trans-Tasman capacity based on 2012 figures. The condition likely to be imposed would require the parties to maintain a minimum level of capacity on these routes for the duration of the authorisation and following an initial period, increase capacity according to a specified growth factor.
Qantas and Emirates initially applied for a 10 year authorisation but due to the dynamic nature of the aviation industry, the ACCC is only proposing to grant a 5 year term.
The ACCC is expected to release its final decision in March 2013.
Photo credit: lrargerich / Foter / CC BY
