Qantas shares flying despite another blow from the ACCC

The consumer watchdog proposes to deny the airline's request, but apparently investors aren't worried.

| More on:
A woman sends a paper plane soaring into the sky at dusk.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Qantas Airways Limited (ASX: QAN) shares are taking off on Friday despite the consumer watchdog striking the latest blow to the struggling airline.

After closing Thursday at $5.59, the Qantas share price is up 1.43% at $5.67 in early trade on Friday morning.

What did the ACCC say?

The Australian Competition and Consumer Commission on Friday announced it was planning to deny a request for coordination between the Australian carrier and China Eastern Airlines.

The two airlines already cooperate to fly passengers and cargo between Australia and mainland China. The pair had asked for permission to extend the agreement until the end of March 2024.

The consumer watchdog has determined that the coordination "between two key competitors may breach competition laws".

Such collusion would only be allowed if the public benefits surpassed the reduced competition in the industry.

ACCC commissioner Anna Brakey expressed doubt that the extension of the deal met this test.

"At this stage, we are not satisfied that the likely harm to competition from Qantas and China Eastern's proposed coordination would be outweighed by any potential benefits," she said.

"We are concerned that the authorisation would provide Qantas and China Eastern with the opportunity and incentive to increase prices, compared to what they would charge absent the alliance, by limiting or delaying the introduction of additional capacity on the Sydney-Shanghai route as passenger demand continues to grow."

At the moment, China Eastern is the only airline flying the Sydney-Shanghai route, with Qantas scheduled to resume its service late next month.

A Qantas spokesperson acknowledged the ACCC's draft determination, but claimed the partnership's benefits to tourism have been "significant".

"This tie-up was first approved in 2015 and, in that time, millions of customers have benefited from the coordination on flight schedules, frequent flyer programs and streamlined check-in and connections."

The ACCC is still seeking submissions until 6 October before making a final decision.

The lame kangaroo

The latest development continues a torrid run for the red kangaroo, which has faced scandal after scandal the past few weeks.

There was public fury over COVID-19 flight credits expiring at the end of the year, which the airline eventually backflipped on. The airline's lobbying on influential government figures was also under scrutiny after the transport minister denied rival Qatar Airways from adding more flights to Australia in the face of elevated fares for consumers.

Then the huge announcement from the ACCC came that it was taking the airline to court with allegations it had sold flights to the public that it knew had already been cancelled.

The consumer watchdog is seeking at least a $250 million fine from the case.

The pressure built up to the point that chief executive Alan Joyce departed early, although now his potentially huge payout is provoking shareholder and consumer outrage.

Then, earlier this week, the High Court denied the airline's appeal against the ruling that it had illegally sacked 1,683 employees to replace them with outsourced labour.

All this has meant the Qantas share price has plunged more than 16.4% since its 24 July peak, despite the company announcing a record profit during reporting season.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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 Scott Phillips.

More on Travel Shares

Woman on a tablet waiting in for her flight in an airport and looking through a window.
Travel Shares

Why did the Flight Centre share price just plunge 9%?

Investors are punishing the Flight Centre share price on Wednesday. But why?

Read more »

A smiling woman looks at her phone as she walks with her suitcase inside an airport.
Travel Shares

4 reasons to buy Qantas shares today

Thinking about buying Qantas shares? Here’s why this expert is bullish on the ASX 200 airline.

Read more »

A man sits in the airport terminal with a laptop and credit card, ready to make a travel booking.
Travel Shares

Would Warren Buffett buy Qantas shares?

Would Buffett get on board with the airline’s shares right now?

Read more »

A happy woman flies with arms outstretched on her boyfriend's back on the beach at dusk.
Travel Shares

Is the Qantas share price too low to ignore?

Can this ASX stock fly again?

Read more »

Man sitting in a plane looking through a window and working on a laptop.
Travel Shares

Why did ASIC take a look when Qantas shares fell last year?

The regulator was asking questions.

Read more »

Two kids wearing pilot's goggles take flight down the runway on their tummies with arms outstretched like wings.
Travel Shares

Up 6% in FY 2024, what's ahead for the Flight Centre share price in FY 2025?

The Flight Centre share price could be poised for big gains in FY 2025. But why?

Read more »

Man sitting in a plane seat works on his laptop.
Travel Shares

Why did the Qantas share price fly backwards in FY 2024?

Despite surging revenues, the Qantas share price lost ground in FY 2024. But why?

Read more »

Man sitting in a plane seat works on his laptop.
Travel Shares

Qantas share price drops 3% amid Qatar rumours

Qantas shares had a turbulent start to trading this morning...

Read more »