Christmas has come early for Qantas, with the competition watchdog approving its alliance with Emirates, but the struggling Flying Kangaroo did not get all the yuletide presents it wished for.
The Australian Competition and Consumer Commission (ACCC) said on Thursday it was likely to give the tie-up the green light when it handed down a final decision in March 2013.
"The ACCC considers that the alliance is likely to result in material, although not substantial, benefits to Australian consumers," ACCC chairman Rod Sims said in a statement.
However, the ACCC rebuffed their request for a 10-year term.
Mr Sims said the ACCC was prepared to grant only a five-year authorisation, citing concerns on their ability to lift ticket prices on some trans-Tasman routes through cutting or limiting capacity.
Therefore, the ACCC said in its draft determination it would impose a condition on Qantas and Emirates that would "restrict the ability of the alliance to reduce or limit growth in its capacity" on four routes between Australia and New Zealand.
The four routes - Sydney-Auckland, Melbourne-Auckland, Brisbane-Auckland and Sydney-Christchurch - represented about 65 per cent of trans-Tasman capacity in the 12 months to June 30, 2012, the ACCC said.
"The condition requires the applicants to maintain a base level of capacity on the routes of concern for the term of the authorisation and to increase capacity in accordance with a specified growth factor," the ACCC said.
Requirements to grow capacity would be put off until a later date, the ACCC said, given Qantas and Emirates' claims about there being excess capacity on the relevant routes.
Qantas chief executive Alan Joyce welcomed the draft decision, saying the airline had put in a strong case to the ACCC that highlighted the benefits of the partnership for travellers and Australian tourism.
"We will now focus on responding to the issue raised by the ACCC in relation to the trans-Tasman as we move to securing final approval of this landmark partnership," Mr Joyce said in a statement.
Qantas had said previously it was considering launching new routes across the Tasman as part of its alliance with Emirates, with direct service between Perth and Adelaide to Auckland believed to be among the options being looked at.
The proposed tie-up involved an extensive codesharing arrangement, reciprocal frequent-flyer benefits and joint marketing, pricing and coordination on certain routes between the two carriers.
It was regarded as a key plank of Mr Joyce's plan to turn around Qantas' struggling international operations, which reported a $450 million loss in 2011/12.
In addition to the public benefits, federal Transport Minister Anthony Albanese said the alliance would help Qantas expand in Asia.
"The solid commercial position provided by the alliance also provides the opportunity for Qantas to invest in additional aircraft capacity and international services, especially to meet the growth in Asia but also its broader international network," he said in a statement.
Some analysts have said the deal could boost Qantas' earnings by up to $150 million, but Qantas had not offered a estimates on how the deal would boost the bottom line.
Qantas closed up one cent at $1.46.