The Qantas Airways Limited (ASX: QAN) share price is under pressure on Thursday morning.
At the time of writing, the airline operator’s shares are down 1% to $4.76.
Why is the Qantas share price trading lower?
The Qantas share price is trading lower today after the Australian Competition & Consumer Commission (ACCC) revealed that it plans to deny the Qantas-Japan Airlines coordination proposal.
According to the release, the ACCC is proposing to deny authorisation for the two airlines to coordinate flights between Australia and Japan for three years under a proposed five year joint business agreement.
The ACCC’s Chair, Rod Sims, explained: “An agreement for coordination between two key competitors breaches competition laws. The ACCC can only authorise these agreements if the public benefits from the coordination outweigh the harm to competition. At this stage we do not consider that Qantas and Japan Airlines’ proposal passes that test.”
The competition watchdog notes that prior to the COVID-19 pandemic, Qantas and Japan Airlines were the only two airlines offering direct flights between Melbourne and Tokyo. They were also two of only three airlines offering direct flights between Sydney and Japan’s capital.
Mr Sims said: “The airline and tourism sectors have been severely impacted by the COVID-19 pandemic. Protecting competition in the airline industry is critical to ensuring recovery in the tourism sector, once international travel restrictions ease. This proposed coordination would appear to undermine competition significantly by reducing the prospect of a strong return to competition on the Melbourne – Tokyo and Sydney – Tokyo routes when international travel resumes.”
“Granting this authorisation would seem to eliminate any prospect of Qantas and Japan Airlines competing for passengers travelling between Australia and Japan, as they did before the COVID-19 pandemic. This elimination of competition would benefit the airlines at the expense of consumers,” he added.
The regulator also believes that Qantas and Japan Airlines combining their operations would make it more difficult for another airline to seek to launch flights on these routes.
What now?
The ACCC is now seeking submissions from interested parties in response to this draft determination by 27 May 2021. After which, it will make a final decision after consideration of those submissions.
Qantas has not yet responded to the news.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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