Note: The summary information posted on this Public Register on the nature and objectives is provided by the applicants. CCS makes no representation as to the accuracy or veracity of the summary information posted.
QANTAS & ORANGESTAR CO-OPERATION AGREEMENT
Case Number: CCS 400/003/06
Date: 25 April 2006
Parties to the agreement
The parties to the Agreement are:
(a) Qantas Airways Limited ABN 16 009 661 901 (‘Qantas’) ; and
(b) Orangestar Investment Holdings Pte. Ltd. Company No 200509817H (‘Orangestar’).
Summary of the nature and objective of the agreement
Qantas is Australia’s largest domestic and international airline. Qantas is also the holding company of a number of subsidiaries including Jetstar Airways Pty Limited (‘Jetstar’). Jetstar conducts Australian domestic and international airline operations.
Orangestar is the holding company of two Singapore value based airline subsidiaries, Jetstar Asia and Valuair. Qantas owns approximately 44.5% of Orangestar. The other major shareholder in Orangestar is Temasek Holdings (Private) Limited.
Given Qantas’ substantial economic interest and material management role in Orangestar, Qantas and Orangestar (together ‘the Applicants’) have entered into a Co-Operation Agreement dated 21 April 2006 (‘Co-Operation Agreement’) in order to better co-ordinate their activities and the activities of their subsidiaries, including network and scheduling decisions, sales and marketing initiatives and pricing and inventory decisions.
The Applicants and their subsidiaries are part of a Single Economic Entity and the Co-Operation Agreement results in significant Net Economic Benefit to Singapore. As such, the Applicants have applied for a Decision from the CCS that the Co-Operation Agreement does not infringe the section 34 prohibition.
There are no goods involved. The services involve passenger air services, which are the principal focus of the Application. The Agreement also relates to air freight services and sale of air travel services, but there are no appreciable effects in those markets.
Outcome
The Commission is of the view that the Applicants do not form a single economic entity. Although the Agreement between the Applicants falls within the ambit of the section 34 prohibition of the Act, the Commission is of the view that the Agreement brings about net economic benefit to Singapore. The Agreement is therefore excluded from the Act.
Section 46 of the Act provides that, if the Commission has determined an application under section 44 by making a decision that the agreement has not infringed the section 34 prohibition, the Commission shall take no further action with respect to the notified agreement unless:
a. It has reasonable grounds for believing that there has been a material change of circumstance since it gave its decision; or
b. It has reasonable grounds for suspecting that the information on which it based its decision was incomplete, false or misleading in a material particular.
The Commission recognizes that the global aviation market is volatile and dynamic. The Commission also notes that the Agreement has yet to be fully implemented and the effects that the Agreement may have on competition in Singapore may not be actualized in the way which the Applicants anticipate. To this end, the Commission may, amongst others, consider the following as a material change of circumstance:
i) Reduction in the number of competing carriers in the current overlapping routes for the passenger air transport market which the Applicants may serve;
ii) Relevant international treaties entered into by the respective Governments;
iii) Changes in the operations of the Applicants which have a significant impact on the Singapore market; and
iv) Any significant change in the shareholdings of Orangestar.
The Commission recognises that its detriment analysis is heavily influenced by its assessment that there is likely to be potential competition on the possible overlapping routes on which the Applicants may operate. If this assessment is not borne out, the Commission may also initiate a review of the decision based on a material change of circumstances.