American Airlines and Qantas are abandoning plans for an
expanded joint business agreement following the U.S. Department of
Transportation's rejection of their antitrust immunity request, the carriers
announced.
For more than a year, the carriers have been seeking
antitrust immunity so they can begin closer cooperation on flights between the
United States and Australia. The new joint venture would have enabled them to
coordinate schedules, cross-sell and share revenue. In anticipation, they had
launched new services, including American routes from Los Angeles to both
Sydney and Auckland and Qantas service to Dallas.
The DOT denied the application on Nov. 18, however, saying
the expanded alliance "would create a potentially anticompetitive
environment, given the scale of the resulting joint business, which would
account for approximately 60 percent of the seats between the U.S. and
Australia."
The DOT previously had granted
antitrust immunity for a joint business agreement in 2011, at which time American
and Qantas had no overlapping nonstop transpacific routes and American had no
service to Australia. Antitrust immunity for the expanded alliance plans required
additional approval, for which the carriers applied in June 2015.
The carriers had until Dec. 2 to object to the most recent decision
and requested an extension on that deadline. The DOT rejected that request, and
on Nov. 28, Qantas said both carriers chose to withdraw the application. "Given
that approval has been in place since 2011, this is an extremely disappointing
sequence of events for Qantas and American, as well as for customers, and
ultimately for trade between the United States and Australia," Qantas
said. "It follows approval from Australian and New Zealand regulators on
the basis that our expanded partnership involved no detriment and would deliver
significant benefits for consumers."
Qantas added that both airlines are reassessing their own transpacific
networks following the rejection. Existing codeshare agreements between the two
carriers will continue.
American Airlines said the 14-day window was not enough to
formulate a response and that the decision represented "a significant
departure from prior DOT decisions," citing existing JVs between United
Airlines and Air New Zealand and between Delta Air Lines and Virgin Australia.
"Other airlines have the significant competitive
advantage of antitrust immunity in the U.S.-Australasia market," according
to American. "With the same opportunity, American and Qantas would have
been able to compete more effectively and increase consumer benefits in the
market."
This is the second time in November the DOT has thrown a
wrench into U.S. carriers' JV plans. While the DOT gave tentative approval this
month for Delta's proposed JV
with Aeromexico, it did so with a Show Cause Order proposing the carriers
together give up 24 daily transborder landing slots from Mexico City's Benito Juarez
International Airport and six slots from New York's John F. Kennedy
International Airport. The carriers already had agreed to give up eight of the
Mexico City slots to comply with Mexican regulators. Giving up the rest of the
slots will "prevent harm to consumers resulting from the carriers'
dominant positions at [Mexico City] and JFK," according to the DOT.
Delta
since has filed an objection to the proposed terms, calling them
"unprecedented remedies and limitations unrelated to any competitive harms
arriving from the [joint venture]." Delta may reconsider its application
should it be required to comply. "Without significant changes to the DOT
remedies proposed in the Show Cause Order, the [joint venture] may not be
economically viable," according to Delta.