Chinese Ambassador to Australia backs proposed Qantas-China Eastern alliance

“I write to you to express my concern about the ongoing review of the proposed Joint Coordination Agreement between China Eastern and Qantas,” Ma said in the letter dated May 15 and published on the ACCC website.

“The aviation plays an important role in promoting bilateral relationship, particularly in facilitating people-to-people exchange.

“The collaboration agreement between China Eastern and Qantas, which was signed in the presence of Chinese President Xi Jinping and Australian Prime Minister Tony Abbott, will inject new momentum into our aviation cooperation by meeting the growing demand for international travels.”

The signing ceremony, which took place in November 2014 at Parliament House in Canberra, unveiled a proposed joint-venture on Australia-China routes the airlines say would lead to new services and more onward connections from China Eastern’s Shanghai hub.

Also, Qantas planned to relocate its operations at Shanghai Pudong Airport to Terminal One, which is where China Eastern is based, as part of the alliance to improve transit times and share facilities, among other benefits.

However, the ACCC said in a draft determination in March it intended to block the alliance because it would give Qantas and China Eastern the ability to raise fares and limit capacity growth on the Sydney-Shanghai route. The two carriers combined held about 83 per cent of all seats between Sydney and Shanghai.

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In response, Qantas and China Eastern have offered a capacity condition on the route in a bid to win over the competition regulator.

And a slew of major groups, from tourism bodies to the Department of Infrastructure and Regional Development, have also come out in support of the proposed tie-up.

Ma said the alliance would not reduce competition or lead to monopoly. Instead, it would serve the interests of customers.

“I believe the coordination between China Eastern and Qantas is in the long term interests of both Australia and China,” Ma wrote.

“I understand that your commission has been in close consultation with China Eastern and Qantas and hope you could bear in mind the interests of our overall relationship and make a fair and reasonable decision on this matter.”

Chinese tourism is Australia’s largest inbound tourism market. Qantas and China Eastern say inbound tourism from China to Australia was expected to be worth $9 billion annually to the Australian economy by 2020.

In January, the two governments agreed to expand significantly available capacity for both Chinese and Australian carriers over the next three years under new bilateral air services agreements. The move came after the two nations put pen to paper on a free trade agreement in late 2014.

The Chinese Ambassador’s full letter can be read on the ACCC website here.