USA blocks Qantas/American Airlines expanded alliance

Qantas ’ vision to ramp up an alliance with
American Airlines is facing a roadblock after
the US Department of Transportation (DOT)
flagged concerns the joint venture would
harm competition on flights between the
United States and Australia. As travelBulletin
goes to print, Qantas and AA were busy
preparing a response to the DOT’s tentative
decision to deny the expanded joint business
and antitrust immunity (ATI) requested after
it said the tighter-knit partnership was “likely
to increase the already pronounced market
concentration” with the combination having a
60%-plus market share.
“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,” the
US regulator said, noting it had found the
US-Australia market was about 16% more
expensive than other international markets
of similar distance and market density for
US point-of-sale passengers. It also said
Qantas commands a revenue premium over
its rivals, charging an average of US$1,271
on mainland USA to Australia flights,
compared to that of United (US$1,087), Delta
(US$862) and Virgin Australia (US$824). “We
tentatively find that the proposed alliance
would substantially reduce or eliminate
competition at the network, country-pair, and
city-pair levels,” the US transport watchdog
concluded.