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U.S.’s DOT rejects Qantas/American Airlines joint venture expansion
November 25th 2016
The U.S. Department of Transportation (DOT) on Friday dealt a blow to Qantas Airways and American Airlines (AA) when it declined an extension of the alliance partnership across the Pacific between the two carriers. Read More »
“The Department is tentatively concluding the proposed alliance expansion would harm competition in the U.S.-Australasia market, in particular in the large U.S.-Australia market. By combining the airline with the largest share of traffic in the U.S.-Australasia market with the largest airline in the United States, the proposed alliance would reduce competition and consumer choice,” the regulator said.
It said Qantas was “by far the largest competitor operating between the United States and Australia and American is likely the only remaining U.S. airline positioned to enter and expand services in a competitively significant and timely manner, given its resources and network size”.
The partners submitted their application for expansion of their trans-Pacific joint venture in June 2015. The Australian authorities have approved the expanded partnership and AA and Qantas have launched additional flights between Australia and the U.S., including’s AA’s own daily Sydney-Los Angeles B777-300ER route.
"Rather than creating a more viable entity to compete more robustly with other airlines, an expanded and immunized American/Qantas alliance would account for nearly 60 percent of U.S. to Australia seats and enjoy the largest market share in nearly 200 city-pair markets, sufficient for the alliance to exert market power,” the DOT argued.
American Airlines said it will appeal the decision and noted DOT’s "significant departure" from its prior decisions. "Other airlines have the significant competitive advantage of antitrust immunity in the U.S.-Australasia market," the airline said in reference to the immunised Air New Zealand-United Airlines and Virgin Australia-Delta Air Lines trans-Pacific partnerships.
Denials of requests for antitrust immunity are rare, Henry Harteveldt, founder of the travel consultancy Atmosphere Research Group, told Reuters, but the U.S. has become increasingly concerned about protecting its passengers in light of increased mergers and stronger alliances. "It's made it more difficult for unaffiliated airlines to compete," he told Reuters.
Hawaiian Airlines and jetBlue Airways opposed the extended AA/Qantas partnership because it would be to the detriment of smaller, independent carriers like themselves, especially in the feeder market.
