Qantas’ extended alliance with American Airlines in doubt after US ruling

A move to expand an alliance between Qantas and American Airlines has been rejected in a preliminary US ruling.

Qantas CEO Alan Joyce with American Airlines senior vice president Art Torno at an announcement last year. Pic: Hollie Adams

The plan to expand the partnership between Qantas and American Airlines to dominate skies over the Pacific Ocean is on the brink of collapse, after the US Department of Transportation tentatively denied their application over fears of anti-competitive behaviour.

The DoT — which had been reviewing the implications of the expanded alliance for more than a year — has decided to knock back the application, saying it would create an anticompetitive environment as it would allow the airlines to control about 60 per cent of all airfares between the US and Australia.

The application was to expand the partnership between Qantas and American to a full alliance, similar to the one the Australian airline has with Gulf carrier Emirates.

Such a deal would have allowed them to co-ordinate scheduling, network planning, sales, customer service and capacity decisions.

But the US department concluded that the proposed alliance would reduce competition and consumer choice.

The DoT also said that consumers would have fewer options for flights between the US and Australia-New Zealand.

“By combining the airline with the largest share of traffic in the US-Australasia market with the largest airline in the United States, the proposed alliance would reduce competition and consumer choice,’’ it said.

“Qantas is by far the largest competitor operating between the United States and Australia, and American is likely the only remaining US airline positioned to enter and expand services in a competitively significant and timely manner, given its resources and network size.’’

The DoT is calling for comments and objections on its decision before making a final ruling. Submissions must be made to the department by December 2.

Qantas (QAN) and American Airlines said they were disappointed with the decision and would “closely review” the order over the coming days.

“For customers, the enhanced partnership provides a greater choice of destinations, a more co-ordinated network and schedule and world-class travel experiences when travelling across the Pacific,” said a Qantas spokeswoman.

“The Trans-Pacific is a highly competitive market served by a number of carriers and the partnership is one that can support and strengthen the economic, cultural and tourism ties between Australia and New Zealand with the United States.”

American Airlines planes

The rejection by the DoT comes after the Australian Competition and Consumer Commission in February granted a five-year approval for the alliance.

In its decision, the ACCC said the ­alliance would be likely to result in continued public benefits for passengers travelling between Australia and the US through enhanced products and services including new frequencies and destinations, more online connections, better scheduling, greater loyalty program benefits, and improved lounge access.

Rivals to Qantas and American — like Hawaiian Airlines — have fiercely objected to the tie-up, saying it would damage smaller airlines trying to compete.

Earlier this year Haiwaiian Airlines chief Mark Dunkerley told The Australian the alliance between Qantas and American would limit Hawaiian’s growth and could increase prices for consumers, as had been demonstrated with similar tie-ups between US and European carriers on trans-Atlantic routes.