Australia’s competition czar, the Australian Competition and Consumer Commission (ACCC), is signaling it will greenlight the ongoing joint venture between Qantas and American Airlines. The government gave interim approval to the joint venture continuing on Friday, February 26. The news will be welcomed at Qantas, who is eyeing a return to the United States later this year.
Public interest justifies the joint venture’s continuation
In 2011, the ACCC first approved the joint venture for a five-year period. Approval was extended for a further five years in 2016. Despite the recent turbulence across the industry, both Qantas and American Airlines are keen to continue the alliance.
“There is no doubt that the metal neutral revenue-sharing joint business made possible through the proposed conduct represents the fastest and most effective way to rebuild, sustain, and ultimately grow Trans-Pacific capacity,” said Qantas in its submission to the ACCC in October.
Giving interim authorization on Friday, the ACCC’s Sarah Court cited public interest benefits in continuing the joint venture.
“Passengers traveling on Trans-Pacific routes could benefit through enhanced products and services, including a greater likelihood of increased capacity and new routes; increased connectivity and improved schedule choice,” Ms Court said.
We need this joint venture, says Qantas
Before the travel downturn, American Airlines operated daily services between Los Angeles and Sydney. Qantas also fed passenger traffic on American’s seasonal Auckland – Los Angeles service under the joint venture agreement. Also on the books were new American Airlines flights between Auckland and Dallas Fort Worth and Christchurch and Los Angeles.
The travel downturn delayed the start of these flights. But American Airlines continues to operate a four times weekly passenger service into Sydney. The airline hopes to grow this to a daily passenger service over the northern summer season.
Qantas is not presently operating passenger flights to the United States. However, in addition to services to Honolulu, Qantas normally operates flights from Melbourne, Sydney, and Brisbane to both Los Angeles and San Francisco. There was also a daily service to New York and a popular A380 service to Dallas Fort Worth. Last year, Qantas also aimed to begin services between Brisbane and Chicago.
Under the terms of the joint venture, American Airlines and Qantas want to coordinate their operations between and within Australia/New Zealand and the United States, Canada, and Mexico.
“Applicants (need) to be able to offer streamlined connectivity and sell competitively to ‘behind and beyond’ destinations, supporting each other’s services through extensive sales and distribution channels on both sides of the Pacific,” says Qantas.
Qantas argues joint venture grows the Trans-Pacific market
Qantas told the ACCC the two airlines only directly compete on one route – the flagship run between Los Angeles and Sydney.
“American recently made clear in re-sizing its international network, it has few options other than to focus on international flying to hubs supported with connectivity offered by a joint business partner. Indeed, the case for needing Qantas to support American’s flying to Australasia is stronger than ever given the devastating reduction in demand for travel out of the western United States to the Pacific,” says the Qantas submission.
Typically, 1.3 million Australians make their way to the United States each year. That number has increased by 8% annually since 2015. Visitors from the United States were the third-largest source of international visitors to Australia in 2019.
In addition to Qantas and American Airlines, Delta Air Lines and United Airlines also operate services between mainland United States and Australia. Both Hawaiian Airlines and Jetstar normally fly between Hawaii and Australia. Further, there are several viable one-stop options across the Pacific, including on airlines like Air New Zealand and Air Fiji.
Qantas argues this normally vibrant airline route is made viable by alliances such as their joint venture with American Airlines.
“It (approval) will provide the applicants with the certainty to justify investment in the joint business across all jurisdictions, which will be the most efficient way to maximize and expedite customer benefits in circumstances where demand recovery will take at least several years as IATA has flagged,” the airline says.
The ACCC is due to give final approval on the five-year extension before the end of April.
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