QANTAS' partnership with Emirates is set to receive approval from the competition watchdog.
In a draft decision handed down on Thursday, The Australian Competition and Consumer Commission (ACCC) said it would authorise an alliance between the two airlines for a period of five years.
"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.
Qantas and Emirates had been seeking a 10-year approval from the ACCC, but Mr Sims said he had concerns about potential fare increases on flights between Australia and New Zealand.
The tie-up between Qantas and Emirates will involve a sharing of schedules, pricing and marketing on routes between Australia and Europe, the Middle East, North Africa, Asia and across the Tasman.
Mr Sims said it will lessen competition on some international routes, but competition from other airlines would mitigate that impact.
However, Qantas and Emirates could reduce or limit capacity on routes between Australia and New Zealand under their partnership, which could result in higher airfares, he said.
"Given the dynamic nature of the aviation industry, the limited extent of public benefits and the significant role of the trans-Tasman capacity condition in the ACCC's decision, the ACCC considers it appropriate to review this authorisation earlier than the ten years requested by Qantas and Emirates," Mr Sims said.
Approval from the ACCC provides Qantas and Emirates immunity from court action for conduct that raises concerns about competition.
Qantas and Emirates are seeking a final decision from the ACCC before the end of March 2013.
Qantas and Emirates deal gets green light | News.com.au