Qantas axes China Eastern partnership

Qantas and Shanghai-based China Eastern Airlines are ending their partnership, following a recent decision by the Australian Competition and Consumer Commission (ACCC) to deny a renewal of the alliance.

The watchdog claimed “the public benefits from the coordination” between the two airlines would  not “outweigh the harm to competition.”

“We are concerned that the authorisation would provide Qantas and China Eastern with the opportunity and incentive to increase prices, compared to what they would charge absent the alliance, by limiting or delaying the introduction of additional capacity on the Sydney-Shanghai route as passenger demand continues to grow,” noted ACCC Commissioner Anna Brakey.

Although China Eastern is currently the only airline flying direct between Sydney and Shanghai, Qantas will resume flights on the same route on Sunday October 29 – coincidentally, the same day China Eastern Airlines begins flights between Brisbane and Shanghai.

As a result, Qantas and China Eastern have now withdrawn their application to the ACCC to extend the joint business arrangement launched in 2015 to coordinating pricing, schedules and marketing on the Sydney-Shanghai route.

“The airlines have commenced a process to unwind the joint business over the coming weeks, which includes an end to the coordination of pricing and schedules, and the removal of joint marketing material,” Qantas said in a statement.

However, a Qantas spokesperson says the airline will “honour all existing bookings, including the frequent flyer benefits and lounge access customers enjoyed during the joint business.”

Qantas and China Eastern will continue to offer codeshare flights on all other routes between Australia and China that both airlines do not fly, including ‘earn and burn’ opportunities for Qantas Points.

In early 2021 the ACCC endorsed a continuation of the Qantas-China Eastern partnership as a part of a post-pandemic recovery plan for international travel, saying “the joint coordination agreement is likely to result in faster and more sustainable reinstatement and potential growth in capacity between Australia and China, representing a benefit to consumers seeking to travel between the two countries as restrictions ease.”

However, it flagged this was likely to change as things returned to normal.

“In times of more normal levels of demand for services between Sydney and Shanghai, as was the case prior to the Covid-19 pandemic, and likely will be again in the medium to long term, the lessening in competition between the Applicants on the Sydney – Shanghai route as a result of the Proposed Conduct is likely to result in a significant public detriment.”

When Qantas and China Eastern launched their partnership in 2015, both airlines flew between Sydney and Shanghai, with that route accounting for an estimated 23% of all travel on direct flights between Australia and China.