U.S. regulators have tentatively blocked a request from
American and Qantas to jointly operate flights between the U.S., Australia and
New Zealand.
The carriers' application for a joint venture with antitrust
immunity has been pending since June 2015.
"The Department is tentatively concluding that the
proposed alliance expansion would harm competition in the U.S.-Australasia
market, in particular in the large U.S.-Australia market," Jenny
Rosenberg, the DOT's acting assistant secretary for aviation wrote in Friday's
order. "By combining the airline with the largest share of traffic in the
U.S.-Australasia market with the largest airline in the United States, the
proposed alliance would reduce competition and consumer choice."
Under the proposal, Qantas and American would jointly schedule,
set fares and operate flights. The carriers already codeshare on flights
between the U.S., Australia and New Zealand, but don't have antitrust immunity.
According to the DOT, a Qantas-American joint venture would
control 60% of the U.S-Australia market. And regulators said that in the years
to come American is best situated among U.S. carriers to add more service to Australia
and New Zealand. Over the past year American has launched direct flights from
Los Angeles to Sydney and Auckland.
The DOT is proposing denial of an American-Qantas joint
venture even though it has previously granted antitrust immunity to ventures
between Delta and Virgin Australia and between United and Air New Zealand.
However, the department noted that those partnerships
control just 19% and 18% of the relevant aviation marketplace, respectively.
In a joint statement Friday, American and Qantas said that the
joint venture would create a broader and more coordinated network for travel
across the Pacific.
"These benefits were recognized by the Australian Competition and
Consumer Commission and New Zealand Minister of Transport as well as public
submissions from key tourism bodies that overwhelmingly support the enhanced
partnership," the companies said. "The transpacific
is a highly competitive market served by a number of carriers and the
partnership is one that can support and strengthen the economic, cultural and
tourism ties between Australia and New Zealand with the United States."
Parties have 14 calendar days to submit objections to the
DOT decision.
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This report was updated on Monday to add response from American and Qantas.