Qantas-AA tie-up ‘unpersuasive’, says US regulator

Qantas has less than a week to rescue its American Airlines tie-up after the US regulator’s red light.

The DOT said the deal would allow Qantas and American Airlines to control about 60 per cent of airfares between the US and Australia.

Qantas and American Airlines have until the end of the week to rescue their plans to dominate Pacific skies after the US Department of Transportation rejected an application from the airlines to extend the deadline for submissions on its controversial decision to ban an expansion of their alliance.

The two airlines want to expand their alliance in a similar deal to the one Qantas has with Emirates. This would allow Qantas and American to co-ordinate schedules and sell seats on each other’s flights, meaning they can split the revenue and costs regardless of which carrier’s plane is used on the route.

But the Department of Transportation has serious misgivings about the nature of the proposed deal and tentatively blocked it on grounds that it would allow Qantas and American to control about 60 per cent of airfares between the US and Australia.

“By combining the airline with the largest share of traffic in the US-Australasia market with the largest airline in the US, the proposed alliance would reduce competition and consumer choice,’’ the department said in its tentative decision that was released last week.

That decision not only leaves what was supposed to be a lucrative alliance on the brink of collapse, but it means Qantas and American are now scrambling to convince the department to overturn the preliminary decision.

Qantas and American last week wrote to DOT requesting that the deadline for submissions in response to its ruling be pushed from December 2 to December 20. The airlines argued there was “good cause” for granting their request because of scheduling issues raised by the Thanksgiving holiday in the US.

The airlines added that an extension would not prejudice other parties and would allow them “to consider the potential implications of the department’s tentative findings and conclusions for their respective business interests”.

But their hopes of overturning the ruling were dealt a further blow over the weekend when DOT said the airlines’ arguments to request a deadline extension were “unpersuasive”.

“The movants have offered no compelling reason to alter the schedule that we have set, nor do we see any,” DOT said.

“The facts and legal issues involved have been well developed and argued by the parties to this proceeding, including the applicants.”

A spokeswoman for Qantas said the airline was considering its next move.

The tentative rejection by DOT came 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, such as Hawaiian Airlines, objected to the tie-up saying it would damage smaller airlines trying to compete.

Earlier this year Hawaiian 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.