The Sydney Morning Herald (SMH) is reporting that Qantas is threatening to pull US routes if the US Department of Transport (DoT) doesn’t approve their joint venture with American Airlines. The DoT already rejected the tie-up back in November 2016, after saying the deal would unfairly concentrate power. The DoT said the 2 airlines would of had 60% of traffic between the two countries.
The rejection by DoT came after the Australian Consumer and Competition Commission (ACCC) authorised the deal for 5 years in February 2016. Hawaiian Airlines and JetBlue also opposed the tie-up. Qantas and American said the DoT decision didn’t take into account the “intense competition” and filed a new application Tuesday. They also said that current co-operation on some routes would be cut if the new application wasnt approved.
— The Sydney Morning Herald (@smh) February 27, 2018
In a joint statement the two said:
“If the joint business is not approved, American and Qantas will have no choice but to further reduce codesharing on their networks. 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.”
They also stated the deal would result in a $310 million benefit to customers, including $89 million in lower fares.
The SYD-DFW route is currently the world’s 3rd longest non-stop air route.
They also said the deal would give more opportunity to launch new routes between Australia, New Zealand and the US including city pairs that are not served by either.
“Some code-sharing and loyalty-point reciprocity on overlapping routes” was dropped in early 2017 after the original DoT rejection.
The original decision by DoT took 17 months.
Virgin Australia and Delta have a similar agreement.
The Media Statement from Qantas in full:
“American Airlines and Qantas have filed a new application with the US Department of Transportation (DOT) seeking approval to form a joint business to better serve customers flying between North America and Australia and New Zealand.
The proposed joint business will significantly improve service, stimulate demand and unlock more than $USD 300 million annually in consumer benefits that are not achievable through any other form of cooperation, including:
- Up to $USD 221 million in value from expanding codesharing between American and Qantas – opening more connections to more destinations.
- Up to $USD 89 million in value by offering a wider range of fare classes across each other’s networks, including lower fares and discounts.
The joint business will also give American and Qantas the opportunity to launch additional routes between the US and Australia and New Zealand, including new flights to city pairs currently not served by either carrier.
An expanded relationship will encourage significant improvements in the overall customer experience, including more improved frequent flyer benefits and investments in lounges, baggage systems and other infrastructure designed to better serve the carriers’ joint customers.
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.
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.
American and Qantas look forward to working together to deliver new routes, a more seamless travel experience, and greater access to lower fares under a joint business.
- The United States Department of Transport issued Qantas and American a tentative Show Cause Order in 2016 proposing not to grant approval for their original application.
- It was both airline’s view that the 2016 decision did not take into account precedent, intense competition on the Trans-Pacific route and the benefits a closer relationship between the two carries had already delivered and would deliver going forward, including new routes.
- The airlines committed to filing a new application after carefully reviewing the Order.”