The Australian Competition and Consumer Commission (ACCC) has rejected the joint business agreement between Qantas Airways and Japan Airlines Co Ltd (JAL) to coordinate flights between the two countries on concerns of reduced competition.

According to the watchdog, the authorisation would not only remove competition between JAL and Qantas, but would also make it difficult for other airlines such as Virgin Australia to operate on routes between Australia and Japan.

Additionally, the agreement would have allowed the airlines to stop competing on all aspects of price and service for three years, stated the regulator.

Last December, Qantas and JAL applied for a three-year authorisation of a joint business agreement with an aim to fully coordinate their air passenger and cargo operations between Australia and Japan.

The agreement would enable them to work together on marketing, sales, pricing, scheduling, distribution strategies as well as agency arrangements.

It would also cover inventory management and frequent flyer programmes, lounges, joint procurement, product and service standards and cargo.

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The two carriers accounted for nearly 85% of passengers travelling between Australia and Japan, in the year before the pandemic.

ACCC Chair Rod Sims said: “The ACCC can only authorise an agreement between competitors if it is satisfied the public benefits would outweigh the harm to competition. The alliance did not pass this test.

“Airlines have been severely impacted by the pandemic and this has been a very difficult period for them. But preserving competition between airlines is the key to the long-term recovery of the aviation and tourism sectors, once international travel restrictions are eased.”