American Airlines Joint Venture With Qantas Receives All Clear

The joint venture between American Airlines and Qantas can finally move forward after the two airlines gained approval from the U.S. Department of Transportation (DOT) on Friday.

American Qantas Joint Venture
American Airlines and Qantas receive approval from the DOT for their joint venture. Photo: Traveloscopy via Flickr

Tentative approval was agreed by the DOT last month granting antitrust immunity to the American and Australian carriers.

Previous U.S. Transportation Secretary Anthony Foxx said no to the joint venture

The two airlines tried to form a joint venture in 2016, but their application was turned down.

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Qantas and American
A Trump appointee has given approval for the joint venture. Photo: Wilco737 via Flickr

Donald Trump appointed U.S. Transportation Secretary Elaine Chao made the announcement Friday afternoon pointing out that it was the first completed review of an airline joint venture since Trump became President.

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Previously, then-President Barrack Obama’s appointee Anthony Foxx rejected the joint venture covering Australia, New Zealand, and the United States after a 17-month review saying it “would reduce competition and consumer choice” according to Reuters.

The joint venture will allow Qantas and American to coordinate pricing

The new deal between Qantas and American Airlines will allow the two full-service operators to intertwine their pricing, planning and frequent flyer programs.

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20 years OneWorld

American and Qantas both belong to the OneWorld alliance. Photo: OneWorld

Between them, the two OneWorld alliance members are already planning the possibility of operating three new routes as well as increasing their capacity on the routes they already fly.

While American Airlines had nothing to say after receiving the approval, Chief Executive Doug Parker had previously said that the new partnership would create new jobs within the airlines.

Back in June, JetBlue Airways Corp let the DOT know that while they had no position on the joint venture between American Airlines and Qantas they did feel that if approved it could “substantially reduce competition in relevant markets and concentrate a huge level of market share and power in the hands of immunized alliances.” According to the Dallas Business Journal.

JetBlue went on to point out that the three big global alliances, StarAlliance, OneWorld and SkyTeam would, if the Qantas-American deal went ahead, control 86% of the U.S. and Australia market. In 2001 regulators approved similar joint ventures between Air New Zealand and United Airlines and then again in 2011 between Virgin Australia and Delta.

Delta Air Lines - Virgin Atlantic_0
Delta and Virgin previously got the go-ahead on a similar deal. Photo: Delta

One of the stipulations of the approval was that the two airlines carry out a self-assessment of the impact their joint venture was having on the competition seven years after it comes into effect and report their findings to the government.

In February of last year, Qantas and American Airlines put their second attempt at a joint venture forward saying that it would allow them to coordinate fares and schedules potentially unlocking up to $310 million per year in benefits for passengers.

In their new application changes were made that included the removal of a clause that would have forbidden either airline from code sharing with another airline.

Code-sharing refers to two or more airlines, publishing and marketing the same flight under their own airline designator and flight number.

Last year Qantas said that gaining approval would allow them and American to improve their service and stimulate demand, possibly generating up to 180,000 new trips between Australia, New Zealand, and the United States.

Conclusion

While this is all well and good for Qantas and American, the only benefit I can see as a consumer is the new routes they are talking about. I have a dislike for joint ventures as they are only entered into to either thwart competition from low-cost carriers or improve the airline’s bottom line.

Before the joint venture, American Airlines and Qantas were competing for the same passengers. This meant that they not only had to be very competitive with their pricing but also with their customer service.

Let us know what you think about the new Qantas, American Airlines joint venture, will it be good for consumers or will we see the airfares start to creep up?

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Gretna

Effectively the benefits that go to this joint venture are those that stem from what is effectively legalised internal collusion: less competition and greater pricing power. No carrier(s) will venture forth to compete where “the three big global alliances, StarAlliance, OneWorld and SkyTeam now will control 86% of the U.S.… Read more »

Here2go

I saved $2000 by booking American for a planned family holiday to the US and Canada at the end of the year compared with Qantas and Virgin (United didn’t feature). Won’t happen anymore. However, if rescheduling occurs between now on then, I won’t be upset if I get put on… Read more »

Martin

A win for big business over the consumer. They only enter into JV’s because it makes THEM money! Doh!

Nigel

All we need now is for Hawaiian Airlines to set up an Emirates-like model, with Honolulu serving as a perfectly-located megahub in the middle of the Pacific, allowing excellent trans-Pacific connections from/to a variety of destinations in North America and Australasia. That would be a nice kick-in-the-a*s for the legacy… Read more »