Qantas faces a penalty of up to $US125,000 for violating “cabotage” rules that prevent it carrying passengers between two domestic destinations in the US.
The fine comes at a sensitive time for the Australian carrier as it makes a second attempt to convince the Department of Transportation, which levied the penalty, to allow it to proceed with its alliance with American Airlines.
An original application foundered in 2016 after the department issued the airlines with a tentative show cause order that proposed rejecting it.
The airlines launched a new application in February and warned they could be forced to reduce trans-Pacific services, including Qantas flights between Sydney and Dallas-Fort Worth, if the deal does not go ahead this time.
The DoT findings stem from incidents in 2015 and 2016 where Qantas flew people holding codeshare tickets on its New York-Los Angeles service and then transferred them onto flights operated by partner airlines to Tahiti and New Zealand.
Qantas can transport people from any point within the US to any point in Australia or a third country, but it is prohibited from carrying passengers domestically
The DoT found that the transfer of passengers to other airlines meant the Australian carrier engaged in unauthorized cabotage and violated the terms, conditions and restrictions of its foreign air carrier permit. It also found Qantas engaged in an unfair and deceptive practice.
Qantas denied any wrongdoing or rule violations but agreed to the consent order as a compromise aimed at resolving outstanding allegations and charges.
It argued that all the flights identified by the department were sold as codeshare flights with a QF flight number and that its actions were consistent with a 1959 decision that held a foreign carrier could “incidentally transport within [the United States] only that traffic which it brings in or carries out”.
It told the department its legal interpretation was that it was deemed to be the carrier transporting the traffic into and out of the US in the operations cited.
“Qantas specifically notes that the business model of airlines in providing air services has become much more sophisticated since 1959 and points out that code-sharing arrangements, which are common today, did not emerge until approximately 30 years after the Qantas decision,’’ the consent order said.
But the DoT said it viewed the issue seriously and hit the airline with a $US125,000 penalty, with half due within 30 days and the other half due if Qantas violated the consent order’s cease and desist provisions over the next year.
“The compromise assessment is appropriate considering the nature and extent of the violations described herein, and serves the public interest,’’ the DoT said. “It establishes a strong deterrent against similar unlawful practices by Qantas and other foreign air carriers.”