Qantas-China Eastern routes proposal hits turbulence with regulator

Coordination of flights between Qantas Airways Ltd and China Eastern Airlines Corp would harm competition on routes between Sydney and Shanghai and should not be allowed, according to Australia's antitrust regulator.

The two airlines have more than 80 percent of the seats on the route. That route accounts for about a quarter of all direct flights between the two nations, the Australian Competition & Consumer Commission said in a statement on Tuesday.

Allowing them to coordinate services will result in "significant public detriment", ACCC Chairman Rod Sims said.

The decision is a further blow to the carriers' efforts to deepen their seven-year-old relationship.

Qantas will get access to a wider network in China, and China Eastern will have improved sales abilities in Australia if the alliance is approved, according to the carriers' Nov 18 application to the regulator.

"They are the two major airlines on the route and the only ones offering daily flights, and so (they are) the major competitive constraint on each other," Sims said in the statement. "Competition between them will be greatly reduced under the proposed agreement."

Submissions will be sought from interested parties by April 8 before a final decision is made on whether to authorize the proposal, the ACCC said.

Andrew McGinnes, a Sydney-based Qantas spokesman, had no immediate comment. China Eastern did not immediately respond to an e-mail requesting comment sent to its investor relations department.