Doubts have been raised over a proposed joint venture between Qantas and Chinese state-owned carrier China Eastern Airlines.
The Australian Competition & Consumer Commission (ACCC) said in a draft decision that it may refuse to approve the deal as it could could give the two carriers undue control over the potentially lucrative Sydney-Shanghai route.
The watchdog’s ruling, to be finalised after submissions by interested parties by April 5, could hamper Qantas' efforts to beef up international operations, Reuters reported.
The two airlines will work together with the regulator as it approaches a final decision, Qantas said in a statement.
The airline said the joint venture would boost bilateral trade - worth around A$150 billion in 2013 - increase services and ultimately open up new routes between the two countries.
"There are more than 20 airlines already providing services between Australia and mainland China, and the sharp pricing on these routes demonstrates that the market is highly competitive," Qantas International chief executive Gareth Evans said.
But the ACCC said the range of options for travel beyond Shanghai may not increase as a result of the deal.
The competition commission’s chairman Rod Sims said: “The ACCC understands Qantas’ desire to form an alliance with a Chinese airline to establish a gateway to North East Asia.
“However, the ACCC’s concern is that they have chosen to do so with their main competitor on the one route between Australia and China on which Qantas operates direct flights.
“Qantas and China Eastern together account for more than 80% of capacity on direct services on the Sydney–Shanghai route.
“They are the two major airlines on the route and the only airlines offering daily flights, and so the major competitive constraint on each other. Competition between them will be greatly reduced under the proposed agreement.”
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