News Backgrounder
American Airlines and Qantas expand Pacific partnership
July 1st 2015
Competition between Australia and the U.S. will escalate in December after Qantas Airways and American Airlines announced a major expansion of their joint business agreement that will see the U.S. carrier return to Sydney after an absence of more than 20 years. Read More »
Qantas also will add capacity into the U.S, including the launch of flights from Sydney to San Francisco, breaking the United Airlines monopoly on the route.
The expanded network is expected to spark a price war between the oneworld alliance pair and rivals, Virgin Australia-Delta (Delta is a Skyteam airline) and Star Alliance’s United and Air New Zealand.
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| Chairman and CEO of American Airlines, Doug Parker: “we are certainly now on a par with Asia-Pacific airlines” |
Announcing the deal at the conclusion of the International Air Transport Association’s annual general meeting in Miami last month, American’s chairman and chief executive, Doug Parker, indicated his airline might soon launch direct flights to New Zealand.
At a joint press conference with Parker, Qantas Group chief executive, Alan Joyce, said the expansion “represents a natural evolution of the existing alliance between Qantas and American, providing the airlines with a platform for growth, closer commercial ties and an even more seamless customer experience on routes between North America and Australia/New Zealand”.
Speaking in Hong Kong a few weeks after the announcement, Parker said his carrier is receiving a new airplane every four days and that Asia and the Pacific are very important growth markets for American.
The airline has invested more than $2 billion in improving its product, including a multi-million dollar upgrade of its cabin, lie flat beds on the wide-body fleet and a better Admirals Club airport lounge network. “We believe we are as good as any carrier in the region and all we are asking is: ‘Give us a shot’” Parker said.
Three U.S. carriers – Delta Air Lines, United Airlines and Hawaiian Airlines – fly into Australia. Qantas and American told Australia’s Competition and Consumer Commission (ACCC) the entry of AA onto the Sydney-Los Angeles route would “create an entirely new competitive dynamic by incentivizing American to sharpen its strategic focus on Australia. In turn, this will stimulate responses from its fierce U.S.-based counterparts, who will view this as a challenge to their international network offerings”.
Qantas and AA have an anti-trust agreement for their partnership across the Pacific, but the expanded joint business agreement takes their co-operation to a new level. As part of the changes, their joint venture will shift to a revenue sharing agreement.
American’s arrival on the Sydney route frees up Qantas’s B747-400s, which are refurbished with the same interiors as its A380 fleet, to re-enter the San Francisco market.
Joyce said: “together with American, we can offer direct flights and unrivalled frequencies from Australia to Hawaii, Los Angeles, San Francisco, Dallas Fort Worth, seasonal services to Vancouver and one stop services to New York via Los Angeles. We also offer coordinated schedules that allow seamless travel within the U. S. and Australia.”
San Francisco is the most popular onward destination for Qantas’ customers travelling to the U.S. “We know there is a strong demand for direct flights, particularly from our corporate clients, who will save about four hours each way by not having to connect through LAX. We expect to see the strong growth in U.S. visitors coming to Australia to continue, because of the strengthening U.S. economy, but also because of the investment AA will make in promoting their new route.
“The world’s largest airline, which is the result of a merger between American and U.S. Airways, will be talking a lot more about Australia in their home market and that’s great news for tourism,” said Joyce.
In Hong Kong, where the airline celebrated the one year anniversary of its Hong Kong-Dallas-Fort Worth route in June, Parker said the coming together of American and U.S. Airways “is going completely well, but we are not done yet”.
“We are embarking on the difficult part of the reservations system,” he said. “We have to merge two very big data bases, but hope to have it done by the end of the year.”
The American giant and Qantas will operate 45 return flights a week out of Australia from Brisbane, Melbourne and Sydney to Dallas/Fort Worth, Los Angeles and San Francisco. Qantas will fly to Honolulu and between Los Angeles and New York, lifting capacity across the Pacific by 9%.
The Australian carrier and its low-cost subsidiary, Jetstar, had 45.9% of the passenger market between Australia and the U.S. in 2014, a figure that includes passengers flying on Jetstar to Honolulu. The next largest carrier in passengers carried last year was Virgin Australia with 12.6%, followed by United Airlines (10.1%) and Delta (5%).
San Francisco was Qantas’ first U.S. destination, which was launched in 1954. It withdrew from the route in 1995, returned for a period and abandoned the route again in 2011.
