Qantas chief executive, Alan Joyce has warned the Australian Competition & Consumer Commission (ACCC) that a rejection of its alliance with China Eastern could leave its operations marginalized and unsustainable in China to the detriment of Australian tourism and trade, The Australian reported.
The country's competition regulator earlier rejected the tie-up because it believed the dominance of the partners on the Sydney-Shanghai route, where they would have 80 per cent market share,
would give them an ability to reduce capacity and raise fares. It argued this outweighed any public benefit, the paper said.
It quoted Joyce as saying that the airline was not returning its cost of capital on the assets it employed to sustain its Sydney-Shanghai service amid stiff pricing competition from other Chinese hub carriers, as well as increasing access to Chinese destinations by hubs such as Singapore, Hong Kong and Kuala Lumpur.
Arguing the ACCC had misread the Chinese market, Joyce said the competition from other hubs and the lack of a return made it hard for Qantas to invest more capital in the Sydney-Shanghai route to achieve a turnaround.
Protectionism vs. liberal aviation policy
But he said the partnership would bring benefits to customers and the airlines including the cargo industry. "The whole intention of this partnership is to grow, that's what we're aiming to do," he said. "What we believe will happen is that we can be more effective competition to the other hubs by working with China Eastern."
The comments came as the alliance partners this week lodged a strongly worded submission warning of the flying kangaroo's dwindling prospects if it maintained its rejection.
The submission accused the ACCC of ignoring the realities of regional dynamics with a narrow focus on the Shanghai-Sydney route that fails to take into account the rapid growth and evolution of the passenger and cargo market, particularly changes to allow additional capacity between Australia and China.
Nol van Fenema