Go-ahead likely for American Airlines-Qantas joint venture

The proposed joint venture by American Airlines and Qantas will cover the US, Australia and New Zealand.
The proposed joint venture by American Airlines and Qantas will cover the US, Australia and New Zealand.PHOTO: AGENCE FRANCE-PRESSE, REUTERS
The proposed joint venture by American Airlines and Qantas will cover the US, Australia and New Zealand.
The proposed joint venture by American Airlines and Qantas will cover the US, Australia and New Zealand.PHOTO: AGENCE FRANCE-PRESSE, REUTERS

US expected to grant tentative approval for deal as well as antitrust immunity, sources say

WASHINGTON • The US Transportation Department is expected to tentatively approve a bid by American Airlines Group and Qantas Airways to operate a joint venture.

Two people briefed on the matter on Sunday said the department is expected to issue tentative approval for the agreement and grant tentative antitrust immunity.

The order, which was expected as early as yesterday, is likely to include conditions to protect competition and allow for government oversight of the venture, the sources added.

The application by American Airlines and Qantas for a joint venture covering the United States, Australia and New Zealand was tentatively rejected in November 2016 by then President Barack Obama's administration amid opposition from rival carriers Hawaiian Airlines and JetBlue Airways.

Regulators in Australia and New Zealand had approved the first application for the joint venture before it was rejected by the US Transportation Department.

American Airlines spokesman Shannon Gilson on Sunday said the airline feels it has "made a compelling case about the benefits of the joint business for customers, and there was no opposition raised... We're hopeful the Qantas joint business will be approved".

American Airlines and Qantas made a second attempt, in February last year, to gain US regulatory permission under President Donald Trump's administration for a venture that would let them coordinate prices and schedules, threatening to cancel services if it was rejected and arguing it could "unlock" up to US$310 million (S$425 million) annually in consumer benefits.

The revised application made significant changes, including removing a provision that would have barred either carrier from code-sharing with other carriers. Code-sharing is a arrangement between airlines in which two or more carriers publish and advertise a single flight under their own airline number.

The airlines argued in their 2018 application that the venture would lead to a reduction in fares and higher capacity as a "more viable third competitor" and require other carriers to respond with improvements to quality, schedules and price.

Qantas said last year that the joint venture would allow the two airlines to "significantly improve service" and "stimulate demand". The airlines said the agreement could generate up to 180,000 new trips between the US and Australia and New Zealand annually.

The airlines said that if the bid were rejected, it could result in Qantas reducing the frequency of, downgrading or even cancelling its A-380 service between Sydney and Dallas/Fort Worth, while American Airlines may further reduce service between Los Angeles, Sydney and Auckland.

The airlines started sharing codes on each other's flights in 1989, co-founded the "oneworld" marketing alliance in 1999 and formed a deeper partnership in 2011 without antitrust immunity.

American Airlines and Qantas currently rely on code-share agreements to make those routes economically viable. If the venture is granted final approval, the two could offer more flights, including to cities not currently served by either, they said.

New routes for Qantas could include non-stop flights from Brisbane to Chicago, Dallas or Seattle, Qantas CEO Alan Joyce said on the sidelines of an airline industry conference in Seoul last week. "We have a number of different, very good routes and plans for a very good expansion into the US when it is approved," he told reporters.

US regulators in 2001 approved similar joint venture agreements for United Airlines and Air New Zealand, and in 2011 for Delta Air Lines and Virgin Australia.

REUTERS

SEE BUSINESS: Airlines rush to fill void left by Jet Airways

A version of this article appeared in the print edition of The Straits Times on June 04, 2019, with the headline 'Go-ahead likely for American Airlines-Qantas joint venture'. Print Edition | Subscribe