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29 November, 2016

APPLICATION DENIED: Qantas and American Airlines’ deeper tie-up rejected

A bid for an expanded alliance between Qantas and American Airlines has been pulled off the table by the carriers after being tentatively denied by the US Department of Transportation (DOT).

Qantas said instead of fighting the decision, it along with American Airlines today elected to withdraw their application for anti-trust immunity to DOT for the expansion of their long-standing relationship.

Qantas said the DOT decision represents a “significant departure from precedent and ignores the evidence of intense competition on the trans-Pacific as well as the material benefits that this alliance already provided and would continue to provide to consumers”.

The two airlines were seeking to share revenue and marketing expenses on flights it operates between the US, Australia and New Zealand, similar to the alliance Qantas shares with Emirates. The anti-trust immunity would have allowed Qantas and American Airlines to co-ordinate schedules and split revenue on flights operating between the three countries, regardless of which plane passengers fly with.

Despite Australian and New Zealand governments approving the alliance, 17 months after applying to the DOT, it came to a decision late last week tentatively denying approving the alliance as it would allow the two airlines to control around 60% of airfares between the US and Australia, according to newspaper reports.

“By combining the airline with the largest share of traffic in the US-Australasia market with the largest airline in the US, the proposed alliance would reduce competition and consumer choice,’’ DOT said, The Australian reported.

Despite the move, Qantas and American Airlines’ existing codeshare arrangements are unaffected.

In a statement released by Qantas today, it said “given that approval has been in place since 2011, this is an extremely disappointing sequence of events for Qantas and American Airlines, as well as for customers, and ultimately for trade between the United States and Australia”.

“It follows approval from Australian and New Zealand regulators on the basis that our expanded partnership involved no detriment and would deliver significant benefits for consumers.”

“Qantas and American Airlines’ joint business has already delivered a number of key benefits for the travelling public. American launched new routes from Los Angeles to Sydney and Auckland and Qantas started services to Dallas and recommenced services from Sydney to San Francisco. As anticipated in our application, there has been a strong competitive response from other airlines on the trans-Pacific, including additional capacity. Fares on the trans-Pacific have fallen since the expanded partnership was announced,” Qantas said.

“Qantas and American Airlines will now separately assess their positions before deciding on next steps. Both carriers are committed to finding ways to work together more closely to deliver benefits to customers that neither could offer alone.”

According to Qantas, without antitrust approval, both airlines will be severely limited in their ability to work together to grow on the trans-Pacific routes. As a consequence, each airline will need to assess their trans-Pacific networks.

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Latest comments

PeterK4850 says:
November 29, 2016 at 12:55 pm
And United and Delta and Virgin Australia and Hawaiian and Air NZ will grow at Qantas’s expense. This is the result by intense lobbying by Delta and United.
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