Qantas and China Eastern seek short term extension

Airlines call on ACCC for more time to sustainably rebuild Australia-China route

Qantas has told the Australian Competition and Consumer Commission (ACCC) the future of its sole route between Australia and China will be in jeopardy if an extension of its alliance with China Eastern is not extended by 18 months.

Currently on pause due to the COVID-19 crisis until at least the end of October, Qantas’ Sydney-Shanghai service may be in doubt if the airlines are unable to maintain their existing five-year-old alliance, they told the ACCC.

The carriers have sought an urgent revocation of their existing conditional authorisation, due to expire in October 2020, and substitute it with authorisation for an Extended Joint Coordination Agreement.

The new arrangement would see Qantas and China Eastern retain their existing alliance and coordinate operations between Australia and mainland China through until March 2022. Beyond then the partners would seek a further extension of their Proposed Conduct.

Prior to the pandemic, China Eastern flew 2x daily between Sydney-Shanghai, 2x daily between Melbourne-Shanghai, 4x weekly between Brisbane-Shanghai, seasonally 3x weekly between Perth-Shanghai, 3x weekly between Sydney-Hangzhou, 3x weekly between Sydney-Nanjing, 3x weekly between Sydney-Wuhan, and 2x weekly between Sydney and Kunming.

At the moment, China Eastern is operating only a weekly service between Shanghai and Sydney. Other routes will be restored depending on government policies.

Qantas and China Eastern told the competition watchdog they plan to coordinate sales and marketing activities, holiday products and packages, distribution, airport services, ground handling and more.

An 18-month extension will enable the aviation partners to “continue to coordinate and rebuild through the COVID-19 pandemic”.

“Qantas’ flights between Sydney and Shanghai will be more likely to be successfully reinstated and sustainable if the market rebuilding process can be coordinated with China Eastern.”

That would be done by the ongoing support of each others operation, “through using each other’s inventory and distribution networks to stimulate a recovery in demand through joint sales and marketing activities. When market dynamics normalise in due course, the applicants will then work together to identify any opportunities for potential future growth,” they told the ACCC.

In their application, the carriers said the extended arrangement will support capacity reinstatement and “potential future expansion, giving the applicants the best chance to restore confidence and sustainable services to customers and businesses in Australia and China in the short-term post-COVID-19 pandemic, while also creating the commercial incentives to work together to deliver other public benefits in the medium-longer term”.

Qantas and China Eastern have requested interim authorisation from the competition watchdog on the proposal, with a decision imminent. A draft determination is expected in September, and a final determination by November/December 2020.

Lead image: Shanghai/credit – Photo by Edward He on Unsplash

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