LONDON – The U.S. Department of Transportation is on its path to approve a joint venture between Qantas and American Airlines, “tentatively granting antitrust immunity,” according to Reuters.
The trans-pacific joint venture will allow both carriers to coordinate pricing, schedules, sales efforts, and frequent flyer programs under the protection of anti-trust immunity.
According to the US DOT, both airlines plan to open up to three new routes within the first 24 months, while also incrementing current capacity on some US-Australia segments.
The tentative DOT approval will ask that both airlines perform a self-assessment of the partnership’s impact on overall competition seven years after it takes effect—a condition that’s not common to any current joint venture. American Airlines and Qantas will have to report the study’s findings to the government in seven years time.
As of today, both airlines will have to wait over a two week period until the DOT comes up with a final decision, which is pending on any opposing arguments placed by airlines in the US market.
Should no other airlines present complaints, the joint venture should be approved before the end of June.
A Long Battle
Back in November 2016, the US DOT issued a show cause order, revoking a previously granted anti-trust immunity (ATI) and joint venture (JV) on routes between the United States and Australia/New Zealand for Qantas and American Airlines.
The two airlines, both members of the oneworld Alliance, had been previously granted a joint venture with antitrust immunity in 2011 when American had no routes to the South Pacific.
However, under the DOT’s rules for such joint business agreements, the agreement is required to undergo a periodic renewal process.
The DOT’s primary objection to the ATI was centered on the strong position that Qantas already enjoys in the US – Australia market.
As the DOJ noted, Qantas already is the largest carrier on 70% of US – Australia city pairs (by origin and destination [O&D] traffic) and offers 53% of the available seats in the market.
Its overall share of US-Australia O&D traffic is a bit lower, at 41%, but the O&D figures, of course, include carriers from third countries such as Cathay Pacific and Fiji Airways connecting passengers to the US.
Following the revoked request, led by Hawaiian Airlines and JetBlue Airways, a second attempt was made in February last year under the Trump administration.
“We’re hopeful that the Trump administration will give the Qantas (joint venture application) a second and more favorable consideration,” said Steve Johnson, AA’s executive vice president for corporate affairs at the time of filing.
Reuters notes that all regulator in Australia and New Zealand had already approved the first application for the joint venture before it was rejected by the U.S. Transportation Department.
“We are excited to get this resolved with the DOT. We think there is a lot of consumer benefits and we are anxious to make our case and get a fair review going forward. So we will get that going in the near future,” noted Andrew Nocella, former Senior VP/Chief Marketing.
Reuters adds that the updated application from both carriers added numerous edits, which includes “removing a provision that would have barred either carrier from codesharing with other carriers.”
More Traffic, Better Service
According to Qantas, the proposed joint venture will improve service and stimulate demand between the US and the Australian/New Zealand market, generating up to 180,000 new trips both ways every year.
On the contrary, should the joint venture be once again blocked, the Australian carrier hinted that its Airbus A380 service between Sydney and Dallas/Ft. Worth is in jeopardy. Likewise, American Airlines would be amending its current Los Angeles – Sydney/Auckland flights.
The two carriers argue that there are up to $310 million in unlocked annual customer benefits to be reaped through the joint venture. Other benefits include the reduction in fares and higher capacity as a “more viable third competitor.”
Shannon Gilson, the spokeswoman for American Airlines, told Reuters that the joint venture application is a “compelling case about the benefits of the joint business for customers.”
“There was no opposition raised to our proposal. We’re hopeful the Qantas joint business will be approved”, she added.
Qantas CEO Alan Joyce mentioned behind the scenes at the IATA Annual General Meeting in Seoul that there could be more Australian links into the U.S. if the venture is approved.
“We have a number of different, very good routes and plans for a very good expansion into the U.S. when it is approved”.
It is understood that non-stop flights from Brisbane to Chicago, Dallas/Ft. Worth or Seattle could be in the running.
It remains clear that there is a lot of pressure being built on the authorities to get this venture approved. It is not in the DOT’s interest to lose business over rejecting not just a joint venture, but further connectivity between the two to three countries.