ACCC approves Qantas-Emirates deal

THE Australian Competition and Consumer Commission has given draft conditional approval to an airline alliance between Qantas and Emirates.

Under the deal struck between the airlines earlier in the year, they will co-operate on passenger and freight operations.

In its draft decision the ACCC found the benefits of the alliance would be "material, although not substantial".

ACCC chairman Rod Sims said the airlines' customers would enjoy increased access to flights, destinations and frequent flyer programs.

Conversely, Mr Sims said the alliance was likely to have an adverse effect on competition where the two airlines offered overlapping services.

This, he said, would be offset by competition from a number of established airlines.

"On the overlapping routes between Australia and New Zealand, the ACCC is concerned that the alliance may have an increased ability and incentive to reduce or limit growth in its capacity in order to raise airfares," Mr Simsa said.

"Therefore, the ACCC is proposing a condition to restrict the ability of the alliance in this regard.

"Given the dynamic nature of the aviation industry, the limited extent of public benefits and the significant role of the trans-Tasman capacity condition in the ACCC's decision, the ACCC considers it appropriate to review this authorisation earlier than the 10 years requested by Qantas and Emirates."

The ACCC has instead granted authorisation for five years, and called on the airlines and other interested parties to make further submissions.

A final decision is due in March with the alliance to begin operations in April.

Qantas and Emirates welcomed the decision, and in a joint statement said they would work on responding to the issues raised by the ACCC.

Transport Minister Anthony Albanese also greeted the decision with enthusiasm, saying it would provide "potential benefits ... through lower fares, improved connectivity and greater access to more European destinations and new destinations in the Middle East and Africa".