The U.S. Department of Transportation has tentatively denied American Airlines and Qantas Airways’ request to expand their joint venture.
“By combining the airline with the largest share of traffic in the U.S.-Australasia market with the largest airline in the United States, the proposed alliance would reduce competition and consumer choice,” the federal government said in its tentative decision.
In 2015, the two carriers had asked for anti-trust immunity on flights it operates between the U.S. and Australia and New Zealand that would allow the carriers to share revenue and marketing expenses on those routes. When it made the request, American said it was re-entering the Australasia market for the first time since the 1990s.
Currently, American operates flights between Los Angeles and Sydney and Auckland. Qantas operates a nonstop flight from Dallas/Fort Worth to Sydney, along with several other flights between U.S. and Australian destinations. Both carriers are part of the oneworld alliance.
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American spokesman Matt Miller said the company plans to file an objection to the DOT’s tentative ruling.
“This represents a significant departure from prior DOT decisions, which have long recognized the pro-competitive benefits of combining complementary international networks,” Miller said. “Other airlines have the significant competitive advantage of antitrust immunity in the U.S.-Australasia market. With the same opportunity, American and Qantas will be able to compete more effectively and increase consumer benefits in the market.”
Delta Air Lines and Virgin Australia has anti-trust immunity on its joint venture as does United Airlines and Air New Zealand.
As part of its analysis of the joint venture, the DOT said it received opposition to the deal from both Hawaiian Airlines and JetBlue Airways. Those carriers argued that an American-Qantas joint venture would not lower fares for consumers or add new flights between the two regions.
Since Qantas already controls the majority of capacity between the two regions, the DOT said adding American would not promote competition.
“Given the degree of market concentration, the probability of such concentration further increasing with an integrated transoceanic [joint business alliance], Qantas’ position in the market, and its ability to charge a significant premium over other carriers, there is considerable risk of competitive harm,” the filing said..