DOT Tentatively Ends American-Qantas Agreement

The First A380 for Australian Carrier QANTAS arrived at Sydney's International Airport on Sunday morning from Toulouse France. Staff and onlookers swarmed Sydney Airport for their first glimpse of the superjumbo.

Decision based on combined market share of all seats between the Australia, New Zealand and the U.S.

The expansion agreement between Oneworld partners American Airlines and Qantas may not come to fruition after the U.S. Department of Transportation (DOT) moved to block the deal on Friday, Nov. 18. In a press release, the DOT announced that they had tentatively denied the two airlines’ expansion application and handed down a Show Cause Order.

In coming to the decision, the DOT reviewed several factors, including traffic data and passenger bookings. Their research concluded that if the expansion agreement were to go through, the two airlines would control a majority of airline seats between Australia, New Zealand and the United States. As presented, both alliance partners would potentially control roughly 60 percent of passenger seat availability between Australia, New Zealand and the United States, which could significantly reduce competition on travel to the island nations.

“Based on its analysis, [the] DOT tentatively found that the expanded alliance would create a potentially anti-competitive environment given the scale of the resulting joint business,” the DOT wrote in their release. ”[The] DOT also noted that consumers would have few remaining competitive options because the U.S.-Australia/New Zealand markets are not well served by alternative routings over third countries.”

If the application had been approved, American and Qantas would have received antitrust immunity on their expansion agreement, granting both carriers more flexibility in ticket sales on each other’s airlines and interline exchanging. In a statement to the Dallas Morning News, American expressed their disappointment with the decision.

“We’re very disappointed in the [DOT’s] tentative decision and will file an objection,” a spokesperson for American wrote in a statement to the Dallas Morning News. “Other airlines have the significant competitive advantage of antitrust immunity in the U.S.-Australasia market. With the same opportunity, American and Qantas will be able to compete more effectively and increase consumer benefits in the market.”

In a statement to Australian Aviation, Qantas expressed similar disappointment. Both airlines have until Dec. 13, 2016 to appeal the decision. American is expected to file an appeal in the case.

[Photo: Global Flier/YouTube]