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Australia’s competition regulator on Monday denied approval for an agreement between Qantas Airways Ltd. and Japan Airlines Co. to coordinate flights between Australia and Japan, saying it would reduce competition when coronavirus travel restrictions are lifted and international travel resumes.

The Australian Competition and Consumer Commission said in a statement that the proposed agreement would not only remove competition between the two top competitors but also make it difficult for other airlines to operate routes between Australia and Japan.

“Preserving competition between airlines is the key to the long-term recovery of the aviation and tourism sectors, once international travel restrictions are eased,” said Rod Sims, chair of the ACCC.

Qantas and JAL together flew some 85% of passengers traveling between Australia and Japan in 2019, the ACCC said.

In response to the decision, Qantas and JAL expressed their disappointment in a joint statement, saying the agreement would have boosted the recovery of the tourism sector once international borders reopened.

“A closer partnership between Qantas and Japan Airlines would have meant more routes, better flight connections and more benefits to frequent flyers. None of these benefits will be realized following the ACCC’s decision,” said Andrew David, Qantas domestic and international CEO.

The sentiment was echoed by Ross Leggett, JAL executive officer and senior vice president.

“We especially believed that the joint business with Qantas would have accelerated the recovery of leisure and business traffic between Japan and Australia, with clear economic and social benefits to both countries in the extremely challenging environment precipitated by the COVID-19 pandemic,” said Leggett.

The ACCC had said in May it planned to deny the approval but would seek submissions from interested parties regarding the plan and only make a final decision after considering them.

After that announcement by the regulator, Qantas proposed a new direct route between the northern Australian city of Cairns and Tokyo as a part of the agreement, a move the airline hoped would draw Japanese tourists to Australia’s tropical north.

Without the approval, the new route will not go ahead, David said.

Currently, Japan’s All Nippon Airways Co. is the only other carrier offering direct flights between Australia and Japan.

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