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Qantas and American reluctantly abandon closer alliance

December 1, 2016 Headline News No Comments Email Email

egtmedia59Qantas and American Airlines have axed plans to expand their code-share alliance after the US Department of Transportation (DOT) refused to reconsider its objection to the closer partnership.About a week ago, DOT tentatively blocked a bid by Qantas and American to cooperate more closely and pool revenue on flights between the US and Australia. See: US blocks closer pact between Qantas and American

In its ruling, DOT said there was a “high risk of competitive harm” in allowing the largest US carrier and the largest Australian carrier to enter into a joint venture.

American Airlines said it would appeal but it had just two weeks to do so. Although American and Qantas asked DOT for a deadline extension, the appeal was rejected.

Accordingly, the airlines decided to withdraw their application for antitrust immunity.

“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,” a Qantas statement said.

“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.”

On the face of it, the DOT ruling places Qantas at a disadvantage against its competitors, even though it is the dominant carrier in the market. Delta Air Lines and United Airlines already enjoy joint ventures in the Australian market through their respective partners, Virgin Australia and Air New Zealand.

American had already pointed out that other airlines enjoyed the significant competitive advantage of antitrust immunity in the US-Australasia market. With the same opportunity, American and Qantas would have been able to compete more effectively and increase consumer benefits in the market, it contended.

American launched service from Los Angeles to Sydney in late 2015.

The Australian regulator, the Australian Competition and Consumer Commission (ACCC) had already approved the alliance for five years.

Written by Peter Needham

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