On 27 March 2013, the Australian Competition and Consumer Commission (ACCC) granted authorisation for Qantas Airways Limited (Qantas) and Emirates to coordinate their operations pursuant to a Master Coordination Agreement. The authorisation has been granted until 31 March 2018.
The alliance between Qantas and Emirates will involve coordination of their air passenger and cargo transport operations and related services (including line maintenance engineering services and flight training for air crew and cabin crew), as well as joint procurement of goods and services (such as aviation fuel). The authorisation does not include coordination for the supply to third parties of catering and aircraft cleaning services, being services where coordination gave rise to competition concerns.
ACCC Chairman, Rod Sims, said that the ACCC, “considers that the alliance would likely result in public benefits through enhanced products and service offerings by the airlines, and improved operating efficiency.”
In particular, the ACCC granted authorisation on the basis that the public benefits resulting from the alliance will outweigh any negative impact on competition. The public benefits are expected to include increased access to a large number of existing frequencies and destinations (under a single airline code), improved connectivity and scheduling, access to each alliance partner’s frequent flyer programs, and increased operating efficiency and flexibility in the management of the aircraft fleet.
Taking this together, the ACCC was satisfied that the alliance would likely result in material public benefits.
The ACCC expressed concerns, however, that the alliance would negatively impact competition in regions where Qantas and Emirates currently offer competing services. The ACCC concluded that, overall, this impact would be minimal.
Importantly, the ACCC identified 4 trans-Tasman routes as those where the alliance would be capable of unilaterally reducing or restricting growth in capacity, with a consequent increase in fares.
Accordingly, the authorisation also includes a condition that Qantas and Emirates maintain, at a minimum, their pre-alliance aggregated capacity on the 4 trans-Tasman routes where they both operate services. This will be reviewed on 1 September 2015.
The authorisation decision is subject to a review period; however, if no review application is brought, the decision will be effective from 18 April 2013.