Australian airline scores approval from competition watchdog to get around competition laws. Here’s the deal.
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The Qantas Airways Limited (ASX: QAN) share price is lifting slightly today after the competition watchdog approved its alliance with American Airlines Group Inc.
The co-operative agreement needed permission from the Australian Competition and Consumer Commission (ACCC) because it otherwise risks breaching competition laws.
The new 5-year approval allows Qantas and its budget brand Jetstar to collaborate with American Airlines on trans-Pacific routes. These include flights to and from the US, Canada and Mexico.
The Qantas share price is up 0.39% on Thursday morning, while American Airlines lost 2.07% overnight.
ACCC commissioner Stephen Ridgeway said the alliance was approved because the public benefits outweighed any anti-competition potential.
“Passengers travelling on trans-Pacific routes are likely to benefit through enhanced products and services, including a greater likelihood of increased capacity and new routes, increased connectivity and improved schedule choice.
“Loyalty program benefits and improved lounge access, cost savings and efficiencies are also likely to be a result.”
The ACCC conceded that the fruits of the alliance won’t be seen until international travel picks up after the COVID-19 pandemic.
Great deal for Australians travelling to North America
The deal allows the airlines to synchronise on marketing and sales, pricing, scheduling, freight, inventory, frequent flyer schemes, airport lounges, procurement and service standards.
“The alliance is unlikely to result in any significant public detriment,” said Ridgeway.
“The ACCC considers that American Airlines would be unlikely to operate its own trans-Pacific services or materially expand its trans-Pacific capacity and frequency without its alliance with Qantas.”
The commission first approved the alliance back in 2011 for a 5-year term, then renewed it in 2016. Qantas and American approached the ACCC in October for another 5-year term.
The ACCC authorisation gives the airlines legal protection for actions that might otherwise get them in trouble for their anti-competitive nature.
Qantas last estimated that international flights might resume by the end of October, while New Zealand travel may restart in July.
At the time of writing, the Qantas share price is trading at $5.15.
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Motley Fool contributor Tony Yoo owns shares of Qantas Airways Limited. 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.