Qantas and American Airlines have decided to ditch plans to expand their alliance after the US government indicated it would block an extension to their current arrangement.
Last week, the US Department of Transportation (DOT) tentatively rejected an anti-trust immunity application submitted by the two airlines, which would have allowed Qantas and American Airlines to sell seats on each others flights, co-ordinate schedules and share all revenue and costs on trans-Pacific flights.
The arrangement is similar to that currently in place between Qantas and Emirates and was given the green lights from both Australian and New Zealand regulators who saw the proposal as having “significant benefits for customers”.
However, DOT raised concerns about competition on the trans-Pacific route in a Show Cause Order, saying the deal would give Qantas and American around 60 percent control of all seats between the US and Australia.
“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.”
US Department of Transportation
“In such circumstances, there is a high risk of competitive harm from approving and granting antitrust immunity.”
As a result, Qantas and American this morning announced their decision to withdraw their application, 17 months after it was submitted.
In a statement, Qantas described the situation as “an extremely disappointing sequence of events” for the two businesses, their customers as well as trade between the United States and Australia.
“Qantas and American Airlines’ joint business has already delivered a number of key benefits for the travelling public.”
Qantas
“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.”
The carrier continued, saying it will now return to the drawing board with American to assess their options before making their next move.
Until then, both airlines have stressed that the application withdrawal will not impact their current relationship or existing codeshare arrangement.