US DoT "Not Convinced" on Qantas-AA Alliance Expansion
28th Nov 2016
Although Qantas and American Airlines had big plans for their alliance in the Pacific, they might have to scrap those after the latest decision by the US Department of Transportation (DoT). Namely, DoT rejected the two airlines application to extend the deadline on submissions for its previous decision not to allow them to expand their alliance.
The Department explained its decision saying that it has ?serious misgivings? regarding the deal?s proposed nature and blocked the submission based on the fact that it would (in its opinion) allow the Australian and the American carrier to gain a 60 per cent share in air fares between their respective countries.
In a tentative decision released last week, the US Department of Transportation said:
?By combining the airline with the largest share of traffic in the US-Australasia market with the largest airline in the US, the proposed alliance would reduce competition and consumer choice.?
Qantas and American Airlines saw the expansion as a perfect way to coordinate their flight schedules and sell seats on the other carrier?s flights, thus splitting the costs and revenue. The DoT?s decision, however, puts the two airlines into a bit of a bind as they now have to find a way to convince the Department to change its decision.
The two airlines send a letter last week to the Department of Transportation, asking the submission deadline to be pushed to 20th December from 2nd December, saying there was a ?good cause? for DoT to grant their request due to scheduling problems Thanksgiving holiday is causing in the United States.
In addition, Qantas and American Airlines also said their alliance expansion will not reflect negatively to other parties and would also allow them to ?consider the potential implications of the Department?s tentative findings and conclusions for their respective business interests?.
However, their arguments for an extension deadlines were seen as ?unpersuasive? by the DoT, who said:
?The movants have offered no compelling reason to alter the schedule that we have set, nor do we see any. The facts and legal issues involved have been well developed and argued by the parties to this proceeding, including the applicants.?
Previously, the Australian Competition and Consumer Commission (ACCC) granted a 5-year approval for the Qantas-AA alliance.