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Qantas to drop DFW if American alliance knocked back a second time?

written by Gerard Frawley | February 27, 2018

American and Qantas are having a second attempt at gaining approval from the United States government for an expanded alliance.
American and Qantas are having a second attempt at gaining approval from the United States government for an expanded alliance.

Qantas says the future of its nonstop Sydney-Dallas/Fort Worth (DFW) service is at risk should it not be able to form a deeper partnership with American Airlines.
The somewhat doomsday scenario is part of Qantas and American’s fresh application to the United States Department of Transportation (DoT) for an expanded alliance with anti-trust immunity (ATI) on trans-Pacific routes.
American too may have to further cut its Los Angeles-Sydney and Los Angeles-Auckland nonstop flights should the DoT again reject the pair’s bid to forge a closer partnership as part of a proposed revenue-sharing, metal-neutral, joint business agreement (JBA).
The application, dated February 26 2018 and released by Qantas on Tuesday, comes 15 months after the DoT knocked back the pair’s first bid to work more closely together, arguing it would harm competition and reduce consumer choice.
American Airlines chief executive Doug Parker and Qantas chief executive Alan Joyce on board an American Boeing 777-300ER in Miami in 2015. (American/Qantas)
American Airlines chief executive Doug Parker and Qantas chief executive Alan Joyce on board an American Boeing 777-300ER in Miami in 2015. (American/Qantas)

At the time, Qantas and American said the Show Cause Order did not take into account precedent, intense competition in the trans-Pacific market and the benefits a closer relationship between the two carriers had already delivered and would deliver, including new routes.
In response to the original Show Cause Order, the pair had reduced cooperation through “economic necessity”, with Qantas removing its QF airline code from American’s Sydney-Los Angeles flight and American no longer codesharing on the Australian carrier’s Sydney-Dallas/Fort Worth and Sydney-Los Angeles services.
American has also downgauged its Sydney-Los Angeles flight from a Boeing 777-300ER to the smaller 787-9, while it has switched Los Angeles-Auckland from a year-round to seasonal offering.
There were also cuts to frequent flyer earning rates on each other’s flights.
“The parties are not supporting each other’s service, American has been forced to downgrade its service to Australia and New Zealand, and the Parties have stopped codesharing on flights between the United States and Sydney,” the application said.
“These are clear indications that without a grant of ATI to facilitate the proposed JBA, the parties’ existing cooperation will at best stagnate or, more likely, continue to deteriorate.”
And it warned of more reductions to come as the two carriers focused “inward to maximize their own profits from their own aircraft to the detriment of the joint business and the traveling public”.
The application said American’s Los Angeles to Sydney service has “consistently been unprofitable” even with limited Qantas support.
“Without Qantas support, this flight becomes economically unsustainable,” the application said.
“Similar concerns apply to American’s service from Los Angeles to Auckland. Without ATI and revenue-pooling, the viability of this service is in question.”
The application noted the potential consequences for Qantas too would be significant should the DoT again decide to knock back the proposed JBA for a second time, with the number of Qantas codeshare destinations on American-operated services set to be dramatically scaled back.
“If the proposed JBA is not approved, American plans to eliminate codesharing on all 53 destinations from Los Angeles and all eight destinations from San Francisco,” the application said. “American will remove over half of the codeshare connections from Dallas (37 of 64).”
“The choice of codeshare cuts is limited to where American can flow the affected passengers over LAX and onto its own LAX-SYD service.
“Without the proposed JBA it will be more profitable for American to serve passengers directly on American equipment out of Los Angeles, for as long as those flights remain viable.
“Without codesharing support to connect its passengers onto American’s flights beyond DFW, Qantas’s A380 service from Sydney to DFW is unsustainable.”
An illustration of some of the codeshare routes at risk without an expanded alliance. (Qantas/American)
An illustration of some of the codeshare routes at risk without an expanded alliance. (Qantas/American)

The application stated load factors on Qantas’s Sydney-Dallas/Fort Worth flight would drop by 20 percentage points if the proposed reduced codesharing came into effect. Currently, roughly seven out of 10 passengers on this service are connecting to or from a domestic US flight.
Meanwhile, load factors on its services to Los Angeles from Brisbane, Melbourne and Sydney would fall between 9.5 and 14.3 percentage points.
A file image of a Qantas Airbus A380 and American Airlines Boeing 777-300ER at Sydney Airport. American now uses a 787-9 to Sydney. (Seth Jaworski)
A file image of a Qantas Airbus A380 and American Airlines Boeing 777-300ER at Sydney Airport. American now uses a 787-9 to Sydney. (Seth Jaworski)

Qantas and American have worked closely together on the trans-Pacific market since 2011, albeit without ATI. The pair started codesharing on each other’s flights in 1989 and helped establish the oneworld alliance as founding members. The other two major alliance groups on the trans-Pacific market were the Delta Air Lines-Virgin Australia tie-up and a JV between United and Air New Zealand. The latter covers only New Zealand-USA routes.
However, American’s decision to start flights from Los Angeles to Sydney in December 2015 – and Los Angeles to Auckland in June 2016 – prompted the two carriers to seek ATI as part of an expanded joint business agreement and establish a metal-neutral, revenue-sharing joint-venture to reflect the US carrier’s entry into the market with its own aircraft.
In February 2016, the Australian Competition and Consumer Commission (ACCC) authorised the JV for five years, while the New Zealand Ministry of Transport gave its approval in November 2015.
However, the DoT’s rejection killed off the JBA.
Currently, Qantas flies from Brisbane, Melbourne and Sydney to Los Angeles. There is also a Qantas-operated service from Los Angeles to New York. The Flying Kangaroo also offers nonstop services from Sydney to Honolulu, Dallas/Fort Worth and San Francisco, as well as seasonal flights to Vancouver. Qantas’s Sydney-Honolulu service is not part of the partnership with American.
Qantas and American said the proposed JBA would result in up to US$310 million in consumer benefits by opening up more connections to more destinations (up to US$221 million) and offering a wider range of fare cases across each other’s networks that included lower fares and discounts (up to US$89 million).
“The proposed JBA will unlock hundreds of millions of dollars in annual consumer benefits that are not achievable through any other form of cooperation,” the application said.
“The bold promise of metal-neutral joint businesses like the proposed JBA has proven accurate, empirically, time and again.
“In short, there is a choice to be made between a grant of ATI leading to incremental consumer benefits estimated at up to $310 million annually, or continued deterioration of the parties’ existing cooperation and respective networks that leaves passengers worse off.”
A summary of the estimated consumer benefits from an expanded American/Qantas alliance. (American/Qantas)
A summary of the estimated consumer benefits from an expanded American/Qantas alliance. (American/Qantas)

Further, the application referenced a study on international airline cooperation that showed average fares as part of a revenue-sharing ATI were 7.98 per cent lower compared with simple codeshare or interline fares.
The application also stated ATI would stimulate up to 180,000 new passengers, or “new demand for air travel”.
“Of course these estimates do not account for rival carriers’ response to the increased competition of the Proposed JBA,” the application said.
“An immunised Qantas-American joint business will impose an even greater competitive constraint on the two other alliances operating immunised joint business to Australasia, who will be forced to respond with quality, schedule, and price improvements of their own, adding to the public benefit of the proposed JBA.”
One concern that was raised in response to the pair’s original application was that immunised alliances such as the one Qantas and American were seeking made it more difficult for independent carriers to reach arm’s length, pro-competitive codeshare or interline agreements with international alliance members.
In response, Qantas and American said the new JBA had been amended to remove the exclusivity provisions that were present in 2015.
“Qantas and American remain free to enter into codeshare and frequent flyer relationships with other carriers,” the application said. “Any potential concerns about access to feed traffic is therefore misplaced.”
Market share of the major operators between Los Angeles and Sydney in 2017. (Qantas/American)
Market share of the major operators between Los Angeles and Sydney in 2017. (Qantas/American)

Steer your own in-flight experience – available on print and digital Whether our classic glossy magazine in your letterbox, daily news updates in your inbox, peeling back a few layers in the podcast or our monthly current affair reports, you can count on us to keep you up to date. Sign up today for just $99.95 for more exclusive offers here. Subscribe now at australianaviation.com.au.

11 Comments

  • Craig

    says:

    Hi its more about protecting there share from competition than passenger benefits Qantas has been whinging since VA started flying to america

  • David

    says:

    If SYD and AKL are profitable for United and Air New Zealand, how does that make SYD to DFW difficult to make a profit? If seven out of ten continue beyond DFW, how would that all change? Can’t people continue on from DFW as they do now with other airline transfers?

  • Stuart Lawrence

    says:

    I would guess that Dallus fort worth is not a attractive tourist city in its own right compared to fun SFO LAX and NEW YORK CITY

  • Craigy

    says:

    @David The answers to your questions are in the article

  • lmf

    says:

    Is it just me, or is it obvious to everyone else that if there is a market and pax who want to fly, then the routes would be profitable?
    I’m all for what their proposing, but surely being “special friends” and OW partners, QF and AA could make this work.
    Meanwhile NZ still flies to more international ports than QF. And they can seem to make all sorts of routes work

  • Ben

    says:

    Give us what we want or we’ll take our bat and ball and go home??

  • David

    says:

    If Allan Joyce is serious, and did drop DFW, watch Air New Zealand and United pounce on the route, stealing The Qantas passengers who would have used it.

  • Lechuga

    says:

    @David, don’t think Air NZ and United can use DFW as it’s not one of their ports, however bothalready offer flights to Houston, and then their onwards flights. Similar situation.

  • Craigy

    says:

    @ David Why would ANZ fly to Dallas? They already fly to Houston which is Uniteds hub.
    @ lmf ANZ fly to 27 international destinations. 9 of which are in Australia. QF flies to 26 international destinations of which 4 are in New Zealand. So they are almost equal destination wise even though 1/3 of ANZs destinations are in Australia.

  • Hutch

    says:

    @lmf you do realise that United and Air New Zealand also have a joint venture? Air New Zealand isn’t a stupid operator, but they have partnerships in many places, to “make all sorts of routes work”

  • Absolutely makes sense for the QF/AA codeshare agreement to now be approved just as it did for the previously approved VA/DL codeshare. Furthermore ANZ have a codeshare agreement ex AKL with the other major player, United.
    Peter

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Qantas to drop DFW if American alliance knocked back a second time?

written by Gerard Frawley | February 27, 2018

American and Qantas are having a second attempt at gaining approval from the United States government for an expanded alliance.
American and Qantas are having a second attempt at gaining approval from the United States government for an expanded alliance.

Qantas says the future of its nonstop Sydney-Dallas/Fort Worth (DFW) service is at risk should it not be able to form a deeper partnership with American Airlines.
The somewhat doomsday scenario is part of Qantas and American’s fresh application to the United States Department of Transportation (DoT) for an expanded alliance with anti-trust immunity (ATI) on trans-Pacific routes.
American too may have to further cut its Los Angeles-Sydney and Los Angeles-Auckland nonstop flights should the DoT again reject the pair’s bid to forge a closer partnership as part of a proposed revenue-sharing, metal-neutral, joint business agreement (JBA).
The application, dated February 26 2018 and released by Qantas on Tuesday, comes 15 months after the DoT knocked back the pair’s first bid to work more closely together, arguing it would harm competition and reduce consumer choice.
American Airlines chief executive Doug Parker and Qantas chief executive Alan Joyce on board an American Boeing 777-300ER in Miami in 2015. (American/Qantas)
American Airlines chief executive Doug Parker and Qantas chief executive Alan Joyce on board an American Boeing 777-300ER in Miami in 2015. (American/Qantas)

At the time, Qantas and American said the Show Cause Order did not take into account precedent, intense competition in the trans-Pacific market and the benefits a closer relationship between the two carriers had already delivered and would deliver, including new routes.
In response to the original Show Cause Order, the pair had reduced cooperation through “economic necessity”, with Qantas removing its QF airline code from American’s Sydney-Los Angeles flight and American no longer codesharing on the Australian carrier’s Sydney-Dallas/Fort Worth and Sydney-Los Angeles services.
American has also downgauged its Sydney-Los Angeles flight from a Boeing 777-300ER to the smaller 787-9, while it has switched Los Angeles-Auckland from a year-round to seasonal offering.
There were also cuts to frequent flyer earning rates on each other’s flights.
“The parties are not supporting each other’s service, American has been forced to downgrade its service to Australia and New Zealand, and the Parties have stopped codesharing on flights between the United States and Sydney,” the application said.
“These are clear indications that without a grant of ATI to facilitate the proposed JBA, the parties’ existing cooperation will at best stagnate or, more likely, continue to deteriorate.”
And it warned of more reductions to come as the two carriers focused “inward to maximize their own profits from their own aircraft to the detriment of the joint business and the traveling public”.
The application said American’s Los Angeles to Sydney service has “consistently been unprofitable” even with limited Qantas support.
“Without Qantas support, this flight becomes economically unsustainable,” the application said.
“Similar concerns apply to American’s service from Los Angeles to Auckland. Without ATI and revenue-pooling, the viability of this service is in question.”
The application noted the potential consequences for Qantas too would be significant should the DoT again decide to knock back the proposed JBA for a second time, with the number of Qantas codeshare destinations on American-operated services set to be dramatically scaled back.
“If the proposed JBA is not approved, American plans to eliminate codesharing on all 53 destinations from Los Angeles and all eight destinations from San Francisco,” the application said. “American will remove over half of the codeshare connections from Dallas (37 of 64).”
“The choice of codeshare cuts is limited to where American can flow the affected passengers over LAX and onto its own LAX-SYD service.
“Without the proposed JBA it will be more profitable for American to serve passengers directly on American equipment out of Los Angeles, for as long as those flights remain viable.
“Without codesharing support to connect its passengers onto American’s flights beyond DFW, Qantas’s A380 service from Sydney to DFW is unsustainable.”
An illustration of some of the codeshare routes at risk without an expanded alliance. (Qantas/American)
An illustration of some of the codeshare routes at risk without an expanded alliance. (Qantas/American)

The application stated load factors on Qantas’s Sydney-Dallas/Fort Worth flight would drop by 20 percentage points if the proposed reduced codesharing came into effect. Currently, roughly seven out of 10 passengers on this service are connecting to or from a domestic US flight.
Meanwhile, load factors on its services to Los Angeles from Brisbane, Melbourne and Sydney would fall between 9.5 and 14.3 percentage points.
A file image of a Qantas Airbus A380 and American Airlines Boeing 777-300ER at Sydney Airport. American now uses a 787-9 to Sydney. (Seth Jaworski)
A file image of a Qantas Airbus A380 and American Airlines Boeing 777-300ER at Sydney Airport. American now uses a 787-9 to Sydney. (Seth Jaworski)

Qantas and American have worked closely together on the trans-Pacific market since 2011, albeit without ATI. The pair started codesharing on each other’s flights in 1989 and helped establish the oneworld alliance as founding members. The other two major alliance groups on the trans-Pacific market were the Delta Air Lines-Virgin Australia tie-up and a JV between United and Air New Zealand. The latter covers only New Zealand-USA routes.
However, American’s decision to start flights from Los Angeles to Sydney in December 2015 – and Los Angeles to Auckland in June 2016 – prompted the two carriers to seek ATI as part of an expanded joint business agreement and establish a metal-neutral, revenue-sharing joint-venture to reflect the US carrier’s entry into the market with its own aircraft.
In February 2016, the Australian Competition and Consumer Commission (ACCC) authorised the JV for five years, while the New Zealand Ministry of Transport gave its approval in November 2015.
However, the DoT’s rejection killed off the JBA.
Currently, Qantas flies from Brisbane, Melbourne and Sydney to Los Angeles. There is also a Qantas-operated service from Los Angeles to New York. The Flying Kangaroo also offers nonstop services from Sydney to Honolulu, Dallas/Fort Worth and San Francisco, as well as seasonal flights to Vancouver. Qantas’s Sydney-Honolulu service is not part of the partnership with American.
Qantas and American said the proposed JBA would result in up to US$310 million in consumer benefits by opening up more connections to more destinations (up to US$221 million) and offering a wider range of fare cases across each other’s networks that included lower fares and discounts (up to US$89 million).
“The proposed JBA will unlock hundreds of millions of dollars in annual consumer benefits that are not achievable through any other form of cooperation,” the application said.
“The bold promise of metal-neutral joint businesses like the proposed JBA has proven accurate, empirically, time and again.
“In short, there is a choice to be made between a grant of ATI leading to incremental consumer benefits estimated at up to $310 million annually, or continued deterioration of the parties’ existing cooperation and respective networks that leaves passengers worse off.”
A summary of the estimated consumer benefits from an expanded American/Qantas alliance. (American/Qantas)
A summary of the estimated consumer benefits from an expanded American/Qantas alliance. (American/Qantas)

Further, the application referenced a study on international airline cooperation that showed average fares as part of a revenue-sharing ATI were 7.98 per cent lower compared with simple codeshare or interline fares.
The application also stated ATI would stimulate up to 180,000 new passengers, or “new demand for air travel”.
“Of course these estimates do not account for rival carriers’ response to the increased competition of the Proposed JBA,” the application said.
“An immunised Qantas-American joint business will impose an even greater competitive constraint on the two other alliances operating immunised joint business to Australasia, who will be forced to respond with quality, schedule, and price improvements of their own, adding to the public benefit of the proposed JBA.”
One concern that was raised in response to the pair’s original application was that immunised alliances such as the one Qantas and American were seeking made it more difficult for independent carriers to reach arm’s length, pro-competitive codeshare or interline agreements with international alliance members.
In response, Qantas and American said the new JBA had been amended to remove the exclusivity provisions that were present in 2015.
“Qantas and American remain free to enter into codeshare and frequent flyer relationships with other carriers,” the application said. “Any potential concerns about access to feed traffic is therefore misplaced.”
Market share of the major operators between Los Angeles and Sydney in 2017. (Qantas/American)
Market share of the major operators between Los Angeles and Sydney in 2017. (Qantas/American)

Steer your own in-flight experience – available on print and digital Whether our classic glossy magazine in your letterbox, daily news updates in your inbox, peeling back a few layers in the podcast or our monthly current affair reports, you can count on us to keep you up to date. Sign up today for just $99.95 for more exclusive offers here. Subscribe now at australianaviation.com.au.

11 Comments

  • Craig

    says:

    Hi its more about protecting there share from competition than passenger benefits Qantas has been whinging since VA started flying to america

  • David

    says:

    If SYD and AKL are profitable for United and Air New Zealand, how does that make SYD to DFW difficult to make a profit? If seven out of ten continue beyond DFW, how would that all change? Can’t people continue on from DFW as they do now with other airline transfers?

  • Stuart Lawrence

    says:

    I would guess that Dallus fort worth is not a attractive tourist city in its own right compared to fun SFO LAX and NEW YORK CITY

  • Craigy

    says:

    @David The answers to your questions are in the article

  • lmf

    says:

    Is it just me, or is it obvious to everyone else that if there is a market and pax who want to fly, then the routes would be profitable?
    I’m all for what their proposing, but surely being “special friends” and OW partners, QF and AA could make this work.
    Meanwhile NZ still flies to more international ports than QF. And they can seem to make all sorts of routes work

  • Ben

    says:

    Give us what we want or we’ll take our bat and ball and go home??

  • David

    says:

    If Allan Joyce is serious, and did drop DFW, watch Air New Zealand and United pounce on the route, stealing The Qantas passengers who would have used it.

  • Lechuga

    says:

    @David, don’t think Air NZ and United can use DFW as it’s not one of their ports, however bothalready offer flights to Houston, and then their onwards flights. Similar situation.

  • Craigy

    says:

    @ David Why would ANZ fly to Dallas? They already fly to Houston which is Uniteds hub.
    @ lmf ANZ fly to 27 international destinations. 9 of which are in Australia. QF flies to 26 international destinations of which 4 are in New Zealand. So they are almost equal destination wise even though 1/3 of ANZs destinations are in Australia.

  • Hutch

    says:

    @lmf you do realise that United and Air New Zealand also have a joint venture? Air New Zealand isn’t a stupid operator, but they have partnerships in many places, to “make all sorts of routes work”

  • Absolutely makes sense for the QF/AA codeshare agreement to now be approved just as it did for the previously approved VA/DL codeshare. Furthermore ANZ have a codeshare agreement ex AKL with the other major player, United.
    Peter

Leave a Comment

Your email address will not be published. Required fields are marked *

Qantas to drop DFW if American alliance knocked back a second time?

written by Gerard Frawley | February 27, 2018

American and Qantas are having a second attempt at gaining approval from the United States government for an expanded alliance.
American and Qantas are having a second attempt at gaining approval from the United States government for an expanded alliance.

Qantas says the future of its nonstop Sydney-Dallas/Fort Worth (DFW) service is at risk should it not be able to form a deeper partnership with American Airlines.
The somewhat doomsday scenario is part of Qantas and American’s fresh application to the United States Department of Transportation (DoT) for an expanded alliance with anti-trust immunity (ATI) on trans-Pacific routes.
American too may have to further cut its Los Angeles-Sydney and Los Angeles-Auckland nonstop flights should the DoT again reject the pair’s bid to forge a closer partnership as part of a proposed revenue-sharing, metal-neutral, joint business agreement (JBA).
The application, dated February 26 2018 and released by Qantas on Tuesday, comes 15 months after the DoT knocked back the pair’s first bid to work more closely together, arguing it would harm competition and reduce consumer choice.
American Airlines chief executive Doug Parker and Qantas chief executive Alan Joyce on board an American Boeing 777-300ER in Miami in 2015. (American/Qantas)
American Airlines chief executive Doug Parker and Qantas chief executive Alan Joyce on board an American Boeing 777-300ER in Miami in 2015. (American/Qantas)

At the time, Qantas and American said the Show Cause Order did not take into account precedent, intense competition in the trans-Pacific market and the benefits a closer relationship between the two carriers had already delivered and would deliver, including new routes.
In response to the original Show Cause Order, the pair had reduced cooperation through “economic necessity”, with Qantas removing its QF airline code from American’s Sydney-Los Angeles flight and American no longer codesharing on the Australian carrier’s Sydney-Dallas/Fort Worth and Sydney-Los Angeles services.
American has also downgauged its Sydney-Los Angeles flight from a Boeing 777-300ER to the smaller 787-9, while it has switched Los Angeles-Auckland from a year-round to seasonal offering.
There were also cuts to frequent flyer earning rates on each other’s flights.
“The parties are not supporting each other’s service, American has been forced to downgrade its service to Australia and New Zealand, and the Parties have stopped codesharing on flights between the United States and Sydney,” the application said.
“These are clear indications that without a grant of ATI to facilitate the proposed JBA, the parties’ existing cooperation will at best stagnate or, more likely, continue to deteriorate.”
And it warned of more reductions to come as the two carriers focused “inward to maximize their own profits from their own aircraft to the detriment of the joint business and the traveling public”.
The application said American’s Los Angeles to Sydney service has “consistently been unprofitable” even with limited Qantas support.
“Without Qantas support, this flight becomes economically unsustainable,” the application said.
“Similar concerns apply to American’s service from Los Angeles to Auckland. Without ATI and revenue-pooling, the viability of this service is in question.”
The application noted the potential consequences for Qantas too would be significant should the DoT again decide to knock back the proposed JBA for a second time, with the number of Qantas codeshare destinations on American-operated services set to be dramatically scaled back.
“If the proposed JBA is not approved, American plans to eliminate codesharing on all 53 destinations from Los Angeles and all eight destinations from San Francisco,” the application said. “American will remove over half of the codeshare connections from Dallas (37 of 64).”
“The choice of codeshare cuts is limited to where American can flow the affected passengers over LAX and onto its own LAX-SYD service.
“Without the proposed JBA it will be more profitable for American to serve passengers directly on American equipment out of Los Angeles, for as long as those flights remain viable.
“Without codesharing support to connect its passengers onto American’s flights beyond DFW, Qantas’s A380 service from Sydney to DFW is unsustainable.”
An illustration of some of the codeshare routes at risk without an expanded alliance. (Qantas/American)
An illustration of some of the codeshare routes at risk without an expanded alliance. (Qantas/American)

The application stated load factors on Qantas’s Sydney-Dallas/Fort Worth flight would drop by 20 percentage points if the proposed reduced codesharing came into effect. Currently, roughly seven out of 10 passengers on this service are connecting to or from a domestic US flight.
Meanwhile, load factors on its services to Los Angeles from Brisbane, Melbourne and Sydney would fall between 9.5 and 14.3 percentage points.
A file image of a Qantas Airbus A380 and American Airlines Boeing 777-300ER at Sydney Airport. American now uses a 787-9 to Sydney. (Seth Jaworski)
A file image of a Qantas Airbus A380 and American Airlines Boeing 777-300ER at Sydney Airport. American now uses a 787-9 to Sydney. (Seth Jaworski)

Qantas and American have worked closely together on the trans-Pacific market since 2011, albeit without ATI. The pair started codesharing on each other’s flights in 1989 and helped establish the oneworld alliance as founding members. The other two major alliance groups on the trans-Pacific market were the Delta Air Lines-Virgin Australia tie-up and a JV between United and Air New Zealand. The latter covers only New Zealand-USA routes.
However, American’s decision to start flights from Los Angeles to Sydney in December 2015 – and Los Angeles to Auckland in June 2016 – prompted the two carriers to seek ATI as part of an expanded joint business agreement and establish a metal-neutral, revenue-sharing joint-venture to reflect the US carrier’s entry into the market with its own aircraft.
In February 2016, the Australian Competition and Consumer Commission (ACCC) authorised the JV for five years, while the New Zealand Ministry of Transport gave its approval in November 2015.
However, the DoT’s rejection killed off the JBA.
Currently, Qantas flies from Brisbane, Melbourne and Sydney to Los Angeles. There is also a Qantas-operated service from Los Angeles to New York. The Flying Kangaroo also offers nonstop services from Sydney to Honolulu, Dallas/Fort Worth and San Francisco, as well as seasonal flights to Vancouver. Qantas’s Sydney-Honolulu service is not part of the partnership with American.
Qantas and American said the proposed JBA would result in up to US$310 million in consumer benefits by opening up more connections to more destinations (up to US$221 million) and offering a wider range of fare cases across each other’s networks that included lower fares and discounts (up to US$89 million).
“The proposed JBA will unlock hundreds of millions of dollars in annual consumer benefits that are not achievable through any other form of cooperation,” the application said.
“The bold promise of metal-neutral joint businesses like the proposed JBA has proven accurate, empirically, time and again.
“In short, there is a choice to be made between a grant of ATI leading to incremental consumer benefits estimated at up to $310 million annually, or continued deterioration of the parties’ existing cooperation and respective networks that leaves passengers worse off.”
A summary of the estimated consumer benefits from an expanded American/Qantas alliance. (American/Qantas)
A summary of the estimated consumer benefits from an expanded American/Qantas alliance. (American/Qantas)

Further, the application referenced a study on international airline cooperation that showed average fares as part of a revenue-sharing ATI were 7.98 per cent lower compared with simple codeshare or interline fares.
The application also stated ATI would stimulate up to 180,000 new passengers, or “new demand for air travel”.
“Of course these estimates do not account for rival carriers’ response to the increased competition of the Proposed JBA,” the application said.
“An immunised Qantas-American joint business will impose an even greater competitive constraint on the two other alliances operating immunised joint business to Australasia, who will be forced to respond with quality, schedule, and price improvements of their own, adding to the public benefit of the proposed JBA.”
One concern that was raised in response to the pair’s original application was that immunised alliances such as the one Qantas and American were seeking made it more difficult for independent carriers to reach arm’s length, pro-competitive codeshare or interline agreements with international alliance members.
In response, Qantas and American said the new JBA had been amended to remove the exclusivity provisions that were present in 2015.
“Qantas and American remain free to enter into codeshare and frequent flyer relationships with other carriers,” the application said. “Any potential concerns about access to feed traffic is therefore misplaced.”
Market share of the major operators between Los Angeles and Sydney in 2017. (Qantas/American)
Market share of the major operators between Los Angeles and Sydney in 2017. (Qantas/American)

Steer your own in-flight experience – available on print and digital Whether our classic glossy magazine in your letterbox, daily news updates in your inbox, peeling back a few layers in the podcast or our monthly current affair reports, you can count on us to keep you up to date. Sign up today for just $99.95 for more exclusive offers here. Subscribe now at australianaviation.com.au.

11 Comments

  • Craig

    says:

    Hi its more about protecting there share from competition than passenger benefits Qantas has been whinging since VA started flying to america

  • David

    says:

    If SYD and AKL are profitable for United and Air New Zealand, how does that make SYD to DFW difficult to make a profit? If seven out of ten continue beyond DFW, how would that all change? Can’t people continue on from DFW as they do now with other airline transfers?

  • Stuart Lawrence

    says:

    I would guess that Dallus fort worth is not a attractive tourist city in its own right compared to fun SFO LAX and NEW YORK CITY

  • Craigy

    says:

    @David The answers to your questions are in the article

  • lmf

    says:

    Is it just me, or is it obvious to everyone else that if there is a market and pax who want to fly, then the routes would be profitable?
    I’m all for what their proposing, but surely being “special friends” and OW partners, QF and AA could make this work.
    Meanwhile NZ still flies to more international ports than QF. And they can seem to make all sorts of routes work

  • Ben

    says:

    Give us what we want or we’ll take our bat and ball and go home??

  • David

    says:

    If Allan Joyce is serious, and did drop DFW, watch Air New Zealand and United pounce on the route, stealing The Qantas passengers who would have used it.

  • Lechuga

    says:

    @David, don’t think Air NZ and United can use DFW as it’s not one of their ports, however bothalready offer flights to Houston, and then their onwards flights. Similar situation.

  • Craigy

    says:

    @ David Why would ANZ fly to Dallas? They already fly to Houston which is Uniteds hub.
    @ lmf ANZ fly to 27 international destinations. 9 of which are in Australia. QF flies to 26 international destinations of which 4 are in New Zealand. So they are almost equal destination wise even though 1/3 of ANZs destinations are in Australia.

  • Hutch

    says:

    @lmf you do realise that United and Air New Zealand also have a joint venture? Air New Zealand isn’t a stupid operator, but they have partnerships in many places, to “make all sorts of routes work”

  • Absolutely makes sense for the QF/AA codeshare agreement to now be approved just as it did for the previously approved VA/DL codeshare. Furthermore ANZ have a codeshare agreement ex AKL with the other major player, United.
    Peter

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