Qantas and Japan Airlines last year proposed co-operating on flights between Sydney, Melbourne and Tokyo as airlines struggled due to international coronavirus restrictions.
Before the pandemic, the two airlines competed for customers flying directly between the cities.
However, the Australian Competition and Consumer Commission said the deal would have allowed the carriers to stop competing on price and service for three years, and made it harder for others such as Virgin to compete.
ACCC chair Rod Sims said preserving competition was important to the long-term recovery of aviation and tourism.
Customers would have been able to fly the routes once Australia’s border restrictions eased.
A Qantas spokesman said staff were disappointed and the decision was particularly unfortunate for Cairns and Queensland.
The two airlines in May offered to start a new route between Cairns and Tokyo once demand reached certain levels.
However, Sims said it might be possible for the two airlines to start these services without the alliance.
Jetstar flights on the same route are due to resume from February.
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