Australia's consumer watchdog said Friday it will reject a co-operation accord between Qantas and Air New Zealand, judging the deal would kill competition on Australia-New Zealand routes.
The two largest operators carry 80 percent of passengers across the Tasman Sea and wanted to co-ordinate all flight activities, including regular meetings to determine schedules and ticket prices. However, the Australian Competition and Consumer Commission said in a draft decision that such an agreement would "fundamentally change the competitive process" since the two airlines already dominate these routes. "The ACCC considers that the agreement would only result in limited public benefits," said ACCC chairman Graeme Samuel.
In addition, the Australian and the New Zealand flag carriers each operate wholly-owned low-cost airlines on the same routes, further cementing their domination of the market, he said. Rivals Virgin Blue and Emirates, which faced hurdles to further expansion on the routes, could not make up the "competitive dynamic" that the deal would remove, he said.
"In these circumstances, the limited benefits from the agreement will not outweigh what the ACCC considers will be significant detriment to consumers in the form of higher prices and reduced travel options at key times." Shares in both airlines fell on the news, with Air New Zealand dropping 5.56 percent by the close of trading in Sydney and Qantas shedding 0.94 percent.
Qantas and Air New Zealand unveiled the Tasman Networks Agreement in April, saying it would allow them to work together on network, schedule, pricing and marketing initiatives for their operations between the two countries.
They touted the benefits of the agreement, such as sustainable low fares, a better spread of departure times, new destination opportunities and frequent flyer advantages.
But analysts have warned of fare increases if competition bodies on both sides of the Tasman endorsed the agreement. The ACCC said it would now seek further comments on its decision before delivering a final verdict next year.
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