New | Australia may reject Qantas-China Eastern Airlines joint venture

An Australian watchdog may reject a tieup between Qantas Airways and a Chinese state-owned carrier, saying it would hurt competition, in a potential embarrassment for Prime Minister Tony Abbott’s efforts to beef up trade with Beijing.

In a draft decision on Tuesday, the Australian Competition & Consumer Commission (ACCC) said it may refuse to approve a Qantas plan for a joint venture with China Eastern Airlines. It said the deal could give the pair undue control over the potentially lucrative Sydney-Shanghai route.

The ruling, to be finalised after submissions by interested parties by April 5, could not only hamper Qantas’ efforts to beef up international operations.

Rejection of a deal sealed in conjunction with a Australia-China trade accord, signed by PM Abbott and Chinese President Xi Jinping at a landmark ceremony last November, could also be a setback for Sydney’s drive to boost commerce with its biggest trading partner.

Shares in Qantas fell as much as 3 per cent to a near two-week low after the ACCC’s initial ruling. The two carriers will work together with the regulator as it approaches a final decision, Qantas said in a statement.

Qantas defended the joint venture, saying it would boost bilateral trade - worth around A$150 billion (US$118 billion) in 2013 - increase services and ultimately open up new routes between the two countries.