SYDNEY, Aug 21 (Reuters) - An Australian regulator reversed an earlier decision and cleared a code-sharing deal between Qantas Airways Ltd QAN.AX and China Eastern Airlines Corp Ltd 600115.SS after the carriers agreed to increase flights between their countries by a fifth.
The ruling enables the airlines to sell flights between several Australian cities and the mainland, rounding out a good week for Qantas which a day earlier posted a A$975 million ($710.68 million) pre-tax annual profit, up from a loss the year before.
It is also likely to boost Australia's biggest tourism market and deepen ties between two countries which in 2014 signed a free trade agreement worth more than $100 billion annually.
"The ACCC considers that the addition of a significant number of new services, and expanded range of destinations ... would constitute a significant public benefit," commission Chairman Rod Sims said in a statement on Friday.
In a draft decision in March, Sims said he may block the stitch-up because it could hurt competition on the lucrative Sydney-Shanghai route in which the airlines currently compete. ID:nL3N0WP6OQ
The airlines now must commit to growing capacity between Australia and Shanghai by 21 percent in the next five years, a measure which would offset fare increases by easing demand, and report their Sydney-Shanghai fares monthly.
In a statement, Qantas Chief Executive Officer Alan Joyce said the deal "allows us to increase capacity between the two countries by linking to key hubs and offer connectivity to each carrier's ... networks".
China Eastern Chairman Liu Shaoyong said it would "generate more tourism and trade opportunities with Australia and provide more convenient travel options for the many customers who travel between our two countries".
In a setback for the airlines in June, Hong Kong authorities rejected their application to have low-cost joint venture Jetstar Hong Kong operate in the Asian financial hub. ID:nL3N0ZB3D9
Qantas shares rose 0.1 percent in mid-session trading while the broader market fell nearly 1 percent. ($1 = 1.3719 Australian dollars)