Qantas in new push for joint venture with American Airlines

Qantas and American Airlines are threatening to cut services if US regulators do not approve their proposed joint venture.

Qantas and American Airlines are planning a joint venture. Picture: Nicole Garmston.

Qantas and American Airlines are threatening to cut services if US regulators do not approve their proposed joint venture.

The airlines are seeking permission from the US Department of Transport to expand their ­relationship. They withdrew an earlier application in 2016 after a tentative denial from the DoT on concerns that a deal would hurt competition.

The airlines, which have a long-term codesharing relationship, say the joint venture “would generate significant consumer benefits not achievable through other means and would not result in any lessening of competition”.

The proposed tie-up would ­unlock more than $US300 million ($382m) a year in consumer benefits through lower fares and discounts and increased codesharing to more destinations, they say in their application.

“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,” the airlines say.

If the tie-up is not approved, the carriers say they would have no choice but to reduce codesharing on their networks, jeopardising the number of services and routes they fly across the Pacific.

“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,” the carriers say.

The airlines argue that these routes rely on codeshare support to be viable.

US regulators tentatively rejected the original application on the basis that an expanded alli­ance would allow Qantas and American Airlines to control 60 per cent of airfares between the US and Australia. The airlines argue that the 2016 decision did not take into account the intense competition on the trans-Pacific route and the benefits that would flow from a closer relationship ­between the carriers.

After the application was withdrawn in 2016, Qantas put an end to codesharing on American Airlines services between Sydney and Los Angeles and cut the number of frequent flyer points travellers could earn on some American Airlines flights, arguing that some areas of co-operation were not ­viable without the joint venture.

The airlines are hoping for a more favourable outcome from the Trump administration for their new application, after a similar partnership between Delta Airlines and Korean Air was ­approved in November.

Both the ACCC and New Zealand Ministry of Transport have already given the go-ahead for the tie-up. In approving the ­alliance in 2016, the ACCC said it would probably provide passengers travelling between Australia and the US enhanced products and services including new frequencies and destinations, more online connections, better scheduling, greater loyalty program benefits and ­improved lounge ­access.

The renewed push for a closer alliance comes after Qantas last week posted a record pre-tax pro­fit of $976 million for the first half.

Qantas shares closed up 5c yesterday at $5.70.