Seth Jaworksi
US Department of Transportation asks both Qantas and American Airlines for more information regarding their proposed Joint-Business Agreement
The United States Department of Transportation has asked American Airlines and Qantas for more details on its proposed expanded alliance and joint-business agreement. The Department of Transportation asked both airlines on Wednesday after reviewed the pair’s application for antitrust immunity (ATI) that was lodged in February. The Department of Transportation indicated that more information was required to “evaluate the joint applicants’.
The information requested included specific levels of service that the proposed joint business would provide, the extent to which antitrust immunity is necessary to achieve these benefits, the discussion of codeshare plans, clarification on revenue share methodology and potential enhancements in yield management practices under a potential immunized joint venture; further explanation of expected consumer benefits; and financial performance data for existing flights.
The Department of Transportation said “When the additional evidence requested has been submitted, we expect to have all the necessary elements to determine that the record is substantially complete and to establish a procedural schedule,”
– American Airlines/Qantas
The Proposal:
In February, American and Qantas submitted their application to the DOT expanded alliance with anti-trust immunity (ATI) on trans-Pacific routes. It was the pair’s second attempt to create this closer relationship. After 15 months, the Department of Transporation rejected their first proposal to work more closely together arguing it would harm competition and reduce consumer choice.
American and Qantas have forecast an estimated $310 million annually in incremental consumer benefits should the alliance be approved. However, the two carriers warned that the future of some trans-Pacific flights, such as Qantas’s Sydney-Dallas/Fort Worth and American’s Los Angeles-Sydney and Los Angeles-Auckland, were at a high risk of being cancelled or having the frequency reduced, should they not be able to form a deeper partnership.
“The parties are not supporting each other’s service, American has been forced to downgrade its service to Australia and New Zealand, and the Parties have stopped codesharing on flights between the United States and Sydney,” the application said. “These are clear indications that without a grant of ATI to facilitate the proposed JBA, the parties’ existing cooperation will at best stagnate or, more likely, continue to deteriorate.” The application noted American’s Los Angeles to Sydney service has “consistently been unprofitable” even with limited Qantas support.
These are the routes at risk of losing their codeshare if the alliance is not approved.
– American Airlines/Qantas
