Australia's competition and consumer watchdog on Friday dropped its opposition to an alliance between national airline Qantas and China Eastern Airlines.
The Australian Competition and Consumer Commission (ACCC) approved the two airlines forming an alliance after months of opposition, allowing them to coordinate their schedules between Australia and China.
Back in March, the watchdog aired concerns that a potential alliance would result in the two airlines controlling more than 80 percent of the capacity on routes such as Sydney to Shanghai.
But on Friday, ACCC Chairman Rod Sims admitted the agreement would also bring "significant" benefits to travelers between the two nations.
"The ACCC considers that the addition of a significant number of new services, and expanded range of destinations, reflecting this gateway strategy, would constitute a significant public benefit," Sims said in a statement.
Under the agreement, both airlines would be able to coordinate processes and flight schedules, allowing greater flexibility and offering shorter domestic and international connections for travelers heading in both directions.
Sims said a number of conditions had been placed on the alliance so that both airlines could not corner passengers into paying unfair and exorbitant prices as a result of the capacity sharing.
"The ACCC considers that competition between Qantas and China Eastern for passengers travelling directly on the Sydney and Shanghai point to point route without onward travel will be greatly reduced under the alliance," he said.
"This may provide them with the opportunity to increase prices for passengers traveling directly between Sydney and Shanghai," he added.
Sims said the ACCC has asked both Qantas and China Eastern to report the average cost of their fares, month by month, on each route they fly, to closely monitor the state of competition on the route.
"This will ensure that ... Qantas and China Eastern ... continue to compete strongly with each other for passengers," Sims said.