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Qantas and China Eastern Abandon Joint Business Extension Application

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Qantas and China Eastern Abandon Joint Business Extension Application

Qantas and China Eastern Abandon Joint Business Extension Application. In a recent development, Australian airline Qantas has decided to withdraw its joint business extension application with China Eastern Airlines, which had been submitted to the Australian Consumer and Competition Commission (ACCC). The ACCC’s objection to this collaboration has raised concerns in the aviation industry.

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ACCC Objection and Concerns

The genesis of this decision can be traced back to the ACCC’s announcement last month, where the organization expressed its intent to block the coordinated cooperation between Qantas and China Eastern on routes connecting Australia and China. The ACCC’s draft decision points to potential violations of competition laws and potential adverse impacts on consumers.

Under the existing agreement, which remains valid until March 2024, the two airlines can coordinate passenger and cargo transportation between Australia and China. The ACCC has highlighted its concern that China Eastern, a government-owned airline and the exclusive carrier on the direct Sydney-Shanghai route, may compromise fair competition.

ACCC Standpoint

Commissioner Anna Brakey emphasized the ACCC’s reservations regarding the partnership, stating, “We believe that the cooperation between Qantas Airways and China Eastern Airlines could have adverse effects on competition that any potential benefits cannot offset. We are concerned that this cooperation could lead to both airlines raising prices.”

The ACCC also expressed apprehension about a surge in passenger demand on the Sydney-Shanghai route with the return of Chinese tourist groups. Approving the extension of the collaboration could potentially incentivize price hikes and anti-competitive practices, such as limiting additional flights to maintain higher fares. The ACCC has stressed that the two airlines have not provided sufficient evidence to support the claim that their joint venture would result in increased flights on the China-Australia route.

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Historical Background

The collaboration between Qantas and China Eastern dates back to 2015, with an unconditional extension granted by the ACCC in 2021, taking into consideration the challenges posed by the pandemic at the time.

Qantas Recent Setbacks with ACCC

This latest development isn’t the only setback Qantas has faced in its dealings with the ACCC. Recently, the airline abandoned its plan to acquire charter operator Alliance Aviation Services for AU$611 million ($387 million). The acquisition, initially agreed upon in May 2022, was rejected by the ACCC in April of the current year due to concerns related to potential price increases and a decline in service quality.

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Moreover, the ACCC filed a lawsuit against Qantas in August, alleging that the airline had released false advertisements promoting flights that had already been canceled. If found guilty, Qantas could be liable for compensation of up to AU$600 ($381 million). These challenges have led to significant developments within Qantas, including the early retirement of its long-serving CEO, Alan Joyce.

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Airlines

Japan Airlines counts the cost of Tokyo crash

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Japan Airlines counts the cost of Tokyo crash

Japan Airlines counts the cost of Tokyo crash, Flights at Tokyo Haneda airport continue to experience disruptions following a fatal collision between a Japan Airlines aircraft and a smaller plane on the runway. The incident, resulting in five fatalities, prompts investigations by transport authorities to prevent such tragedies in the future.

Market Fluctuations Post-Accident

Upon the reopening of markets after Japan’s New Year’s holidays, Japan’s second-largest airline, Japan Airlines, witnessed a surge in sell orders. Despite the initial setback, the share price managed to recover by the end of the trading day.

Financial Impact and Insurance Coverage

Japan Airlines updated investors, highlighting the coverage of the loss of the Airbus A350 aircraft through insurance. However, additional costs are anticipated, including offering ticket refunds to customers with reservations through March 31, 2023, who wish to cancel their flights. The estimated operating loss for the airline stands at approximately ¥15 billion ($105 million), a significant challenge considering the airline’s recent recovery from pandemic-related losses.

Short-Term Setbacks, Long-Term Resilience

The tragic incident is expected to impact the airline’s earnings for the year to March. Despite this setback, JAL’s longer-term prospects appear resilient. While airline demand in Asia has lagged behind the US and Europe post-pandemic, JAL’s full-service flights have already seen passenger revenue return to pre-pandemic levels. Operating margins have improved, thanks to price hikes and a substantial increase in the average revenue earned per passenger kilometer flown.

Growth Expectations and Market Outlook

Shares of Japan Airlines currently trade at 12 times forward earnings, a premium compared to US peer United Airlines. This reflects positive growth expectations and suggests that the market anticipates the airline’s resilience in the face of short-term challenges.

Conclusion

Despite the immediate challenges posed by the Tokyo crash, Japan Airlines remains steadfast in addressing the incident’s aftermath. The airline’s financial resilience and positive market outlook indicate a potential recovery and continued growth, emphasizing its commitment to passenger safety and long-term success.

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