Australian watchdog approves Qantas-Emirates tie-up

Australian Competition and Consumer Commission (ACCC), the country's competition regulator, yesterday gave its conditional nod for an alliance between national flag carrier Qantas Airways Ltd and Dubai's Emirates for a 5-year period.

The tie-up between the two leading airlines will involve coordination of the airlines' passenger and cargo transport operations.

ACCC chairman Rod Sims said in a statement, ''The ACCC considers that the alliance is likely to result in public benefits through enhanced products and service offerings by the airlines, and improved operating efficiency.''

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 programmes.

It is also expected that the association will 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,'' Sims said.

Earlier in September, Qantas signed a 10-year deal with Emirates, ending a 17-year long relationship with British Airways in an effort to boost its international business.

The alliance envisages moving Qantas' hub for European flights to Dubai from Singapore, coordinate with Emirates on ticket prices and schedule and apply a benefit-sharing model beginning April 2013. (Qantas to tango with Emirates, end tie-up with British Airways)

The ACCC considers that the deal will not significantly affect competition in regions where Qantas and Emirates currently compete in passenger and cargo services.

However, the watchdog is concerned about four trans-Tasman routes where the airlines compete with each other and account for around 65-per cent of total passenger capacity between Australia and New Zealand. On these routes Qantas and Emirates will have the ability to reduce or limit growth in capacity in order to raise airfares.

To address this concern, the ACCC has imposed a condition which requires the carriers to maintain their pre-alliance aggregate capacity on the four routes, subject to a review to consider whether increases in the minimum required capacity are warranted.

''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,'' Sims said.

The conduct authorised by the ACCC enables the airlines to coordinate their passenger and cargo transport operations, line maintenance engineering services and flight training for air crew and cabin crew as well as joint procurement of goods and services.

Qantas and Emirates have not sought authorisation for the supply to third parties of catering and aircraft cleaning services, where coordination between the two airlines may give rise to competition concerns.