Plans by Qantas to expand the number of seats it flies with American Airlines to the US have been knocked back on competition concerns.
The US Department of Transportation has issued a show cause order tentatively denying an application by Qantas and American Airlines to expand their alliance for services between the US and Australia/New Zealand.
The department says analysis of traffic data, passenger bookings and other evidence show the expanded alliance would create a potentially anti-competitive environment.
The deal, which would set pricing for seats sold in the US, would account for about 60% of capacity between the US and Australia.
“Consumers would have few remaining competitive options because the US-Australia/New Zealand markets are not well served by alternative routings over third countries,” the department said in a statement.
Qantas and American have 14 days to reply.
The two airlines made an application more than a year ago seeking anti-trust immunity to replace an existing business agreement with a new alliance, including revenue sharing.
Hawaiian Airlines was among those objecting to the deal, saying smaller independent operators would suffer.
Qantas and American have 50 return services each week between Australia and the US, including Honolulu. More than 551,000 Americans visit Australia each year.
In February, Australia’s consumer watchdog, the ACCC (Australian Competition and Consumer Commission) gave Qantas the go ahead to continue to coordinate their operations on trans-Pacific routes with American Airlines for a further five years.
“The ACCC considers this alliance would be likely to result in continued public benefits for passengers travelling between Australia and the US through enhanced products and services including new frequencies and destinations, more online connections, better scheduling, greater loyalty program benefits, and improved lounge access,” ACCC commissioner Roger Featherston said.
The airlines want an expanded Joint Business Agreement for a period of 10 years, allowing them to coordinate marketing and sales, freight, pricing, scheduling, frequent flyer programs, lounges and joint procurement and product and service standards.
The US airlines United and Delta have joint ventures serving the Australia-US route with Virgin Australia and Air New Zealand.