American, Qantas promise lower fares in new bid for joint venture

February 27, 2018
American Qantas alliance

American Airlines and Qantas have flagged a range of lower fares and discounts if a new application to the US Department of Transportation to form a joint venture is approved.

But the stick accompanying the carrot is a warning they may have to reduce some services between the US and Australasia if the bid is rejected

At risk, according to the airlines, is the Qantas Airbus A380 service between Sydney and Dallas-Fort Worth and American’s services between Los Angeles and Sydney and Auckland.

The original application foundered in 2016 when the US DoT issued the airlines with a tentative show cause order that proposed to the reject the application.

The proposed alliance had already been given a green light by regulators in Australia and New Zealand and the airlines at the time vowed to try again.

The airlines had applied to expand their joint business agreement to a full alliance similar to the one Qantas has with Gulf carrier Emirates that would allow them to operate “metal neutral’’ joint flights alongside each other.

But the DoT concluded that the proposed alliance would substantially reduce competition and consumer choice without producing counterbalancing public benefits.

It said it would particularly harm competition on the large U.S.-Australia market.

The department analyzed traffic data, passenger bookings, and other evidence submitted to reach its conclusion the alliance create a potentially anti-competitive environment with the two airlines accounting for 60 per cent of seats between the two countries.

It noted consumers would have few remaining competitive options because the markets between the US and Australia-New Zealand are not well served by alternative routings over third countries.

But American and Qantas argued the decision did not take into account precedent, intense competition on the Trans-Pacific route and the benefits the partnership would deliver.

With a new US Administration now in office, the airlines are arguing in the new application the joint business would significantly improve service, stimulate demand and unlock more than $US300 million annually in consumer benefits not otherwise available.

This would include up to $US221m in value in expending codesharing between the airlines. offering more connections to more destinations.

There would also be up to $US89 million from offering a a wider range of fare discounts across each other’s networks, including lower fares and discounts.

“All these benefits will stimulate significant demand for new travel – generating up to 180,000 new trips between the US and Australia and New Zealand every year,’’ the airlines said in a statement.

“Critically, if the joint business is not approved, American and Qantas will have no choice but to further reduce codesharing on their networks.

“This will jeopardise the number of services and routes each carrier flies between the US and Australia and New Zealand.

“For example, Qantas may be forced to reduce the frequency of, downgauge or potentially cancel its A380 service between Sydney and Dallas/Fort Worth, and American may further reduce its services between Los Angeles and Sydney and Auckland.

“These routes rely on codeshare support from each airline’s feeder network via their respective hub cities to be economically viable.”

The new application comes as Qantas is looking at more direct services to US cities using its Boeing 787-9 Dreamliners.