Qantas, AA shelve partnership expansion: what happens now?

By Chris C., November 29 2016
Qantas, AA shelve partnership expansion: what happens now?

Qantas and American Airlines will no longer seek to expand their joint venture partnership following a tentative denial of antitrust immunity by the US Department of Transportation.

The airlines had hoped to allay the DoT’s concerns over competition on trans-Pacific routes but were also declined an extension to do so beyond the two-week window afforded by the DoT, resulting in the withdrawal of the airlines’ joint application on aspects such as revenue sharing.

But what does this regulatory stoush actually mean for travellers?

Today, not too much: Qantas will continue codesharing on American Airlines flights and AA will do likewise with Qantas, with travellers earning and spending frequent flyer points – and earning status credits – as they do today whenever flying with either airline.

Sleep easy: you'll still earn Qantas Points and status credits when travelling with American Airlines.

Qantas and American will also remain partners through their longstanding memberships in the global Oneworld airline alliance, promising perks such as priority check-in and airport lounge access to selected frequent flyers when travelling with these and all other Oneworld carriers.

For the immediate future, all Qantas and American Airlines flights between the USA and both Australia and New Zealand will run as scheduled, including AA’s recently-launched routes from Sydney and Auckland to Los Angeles, and Qantas’ newly-returned Sydney-San Francisco flights.

However, what happens next is yet to be decided, with both Qantas and AA mulling the future shape of their respective networks.

“Without antitrust approval, Qantas and American Airlines will be severely limited in their ability to work together to grow on the trans-Pacific routes,” Qantas said in a statement. “As a consequence, each airline will need to assess their trans-Pacific networks.”

“This is an extremely disappointing sequence of events for Qantas and American Airlines, as well as for customers,” the statement continues. “Both carriers are committed to finding ways to work together more closely to deliver benefits to customers that neither could offer alone.”

Qantas and American Airlines submitted their application in June 2015, almost six months before American started flights between Sydney and Los Angeles and Qantas resumed its Sydney-San Francisco route.

A Qantas spokeswoman said the airline was now "considering (its) options" on the Sydney-San Francisco route, for example.

With limitations on the airlines’ commercial cooperation, the prospect of using Qantas Points to upgrade to business and first class on American Airlines flights – and vice versa – is also in doubt, having previously been considered as part of the expanded joint venture.

Read: Qantas CEO mulls points upgrades on American Airlines flights

Chris C.

Chris is a a former contributor to Executive Traveller.

Qantas - Qantas Frequent Flyer

18 May 2011

Total posts 232

I wonder if Sydney-Chicago is off the drawing board now?

12 Dec 2012

Total posts 1024

Maybe in a year or so, they'll have had the chance to go over the DoTs issues in more detail, have worked out options both with and without a ATI level partnership, gotten any new data on any UA/NZ and DL/VA moves and then re apply.

Prediction: AA will still serve SYD with their 777-300ER, and AKL with their 787-8. Qantas will still serve SFO from SYD. 

No disaster will take place. AA's service to SYD helps QF 'right-size' (from what I've heard they think that route had too much capacity when the QF 747 served it), and also permits them to return to SFO (which is a business-heavy destination). AA's service to AKL is also the only OneWorld service between AKL and LAX from what I know, and they are using a small jet and will get feed from QF as well as all the QFF members in AKL.

They wouldn't have launched these routes with an ATI "pending" if an ATI were a necessary condition for the success of those routes.

So, QF and AA will bellyache and whine, and whilst they probably won't expand their flights and partnership beyond the current arrangement, they aren't going to wind anything back. 

Also, this gives Virgin and Delta (clearly the weakest player in the market) a bit more breathing room. 

Qatar Airways

04 Apr 2014

Total posts 25

What impact will this have on QF 789 deployment? 

24 Oct 2010

Total posts 2550

Given no Boeing 787 routes have been announced, estimations of 'impact' would be premature...

Probably none. 

Besides agreeing on a common price, what would the closer relationship, which has been halted by the DOT allow AA and QF to do?

I still don't quite understand that bit.

I don't know about other readers, but if there was a table, like the one below explaining the different benefits, that would certainly help.

*trying to insert a picture - not having much luck*

"Besides agreeing on a common price, what would the closer relationship, which has been halted by the DOT allow AA and QF to do?"

It would've allowed revenue-sharing (I think) and complete metal-neutrality with respect to frequent flyer benefits. In effect, AA and QF would've operated as a single airline on those routes.

Qantas - Qantas Frequent Flyer

08 Sep 2012

Total posts 236

Revenue sharing and common pricing. As you allude to, they would have ceased competingwith each other  and operated as a single airline much like QF and BA did under their JV. Joint marketing etc It would have gone far beyond the oneworld relationship.

Common pricing and associated revenue sharing seems to be the goal, in addition to other synergies (non-wasteful overlapping) around marketing etc.

OK - so here's the questions:

  1. Why does the DOT consider the risk of common pricing etc. to be so high as to put a stop to this, while the AU regulators seem happy to approve it?
  2. Do the AU regulators not consider this risk to be significant?
  3. Who do the AU regulators look out for? Qantas or the Australian consumer?

Qantas - Qantas Frequent Flyer

26 May 2014

Total posts 463

I understood that Hawaiian was the main objector to the proposed JV.  Does that suggest that the JV would have allowed QF and AA to offer more attractive AU-US tickets with a Hawaii stop-over? 

Qantas - Qantas Frequent Flyer

28 Oct 2011

Total posts 462

They could do this now, if they choose. It's certainly possible to fly QF to HNL and then AA to the mainland.

29 Nov 2016

Total posts 1

Have booked SYD/SFO for next Sept, whats the likelihood of changes?

Qantas - Qantas Frequent Flyer

28 Oct 2011

Total posts 462

Probably none - provided that QF is not losing money on the route.

10 Aug 2016

Total posts 4

Another reason for QF to launch the 787 on the SYD-SFO route, right sizing SFO with 787 will ensure the route stays in place in my opinion.

Air New Zealand - Airpoints

21 Jan 2016

Total posts 193

I think they should consolidate on what QF/AA got, on their  Trans Pacific routes, in case EK does SYD/MEL-AKL-LAX services with a A380. The chances of it happening are real, as EK is using AKL to positioning their A380's being as it cheaper to then SYD and MEL. With non-stop DXB/AKL services, AKL is in perfect location for a hub for an AKL/LAX sector. NZ/UA are fully aware this could happen.

NZ, UA, VA, DL and HA objected to QF/AA joint venture application.

American Airlines - AAdvantage

13 Jun 2015

Total posts 2

No matter what AA applies for, UA & DL are objecting it. DL is objecting to any other US Carrier's application for that matter.

12 Dec 2012

Total posts 1024

You just have to look at the fight DL created over HND to see that....

19 Aug 2011

Total posts 23

Is that even allowed? I didn't think EK had fifth freedom rights on the transpac routes.

21 Aug 2015

Total posts 86

The US obviously thought this cosy little arrangement was anti competitive. A rare win for consumers. AA Jclass is far superior to QF, and so is Delta and Virgin. We may see price competition.

Its time we let SQ fly the Pacific, and even EK..........lets get a better deal for consumers. I am fed up with the QF rip off. 

31 Mar 2016

Total posts 621

@zoomzoom:"Its time we let SQ fly the Pacific, and even EK.."
1st of all, that will require the AU regime to grant such freedoms to 3rd-party foreign carriers.  2ndly, that will require the U.S. regime(Note: Easy to imagine trade policy direction under Trump...) to also parallel such rights granted by the AU regime as such ops are  not covered by the AU-U.S. openskies.

2ndly, if the econ-political environment in AU+U.S. is that liberal re 5th freedoms(i.e. allow 3rd party foreign carriers in U.S.-AU nonstop mkt), why favor SQ and EK only?  All 3rd party foreign carriers should be allowed.

"lets get a better deal for consumers. I am fed up with the QF rip off." 
Imagine what will happen to avg fare when powerful 3rd party foreign longhaul LCCs such as AirAsiaX, Norwegian, AC Rouge, etc. are allowed to enter the U.S.-AU mkt.....that will kill QF's Trans-Pcf golden egg instantly while massively beef-up consumers' wallets.

31 Mar 2016

Total posts 621

IMHO, failure for AA+QF to achieve ATI for their Trans-Pcf JV creates moderate strategic/financial impacts to AA & QF directly and very minor indirect impacts fm consumer perspective.

AA & QF:
Any immunized JV is essentially equivalent to a legalized cartel.  It legally allow 2(or more) competitors in a mkt to open ALL of their books re financials+ops+mkt plans and show them to each other, pool resources+costs, jointly fix price and most importantly, share all profits/losses.  So 1+1(e.g. QF+AA) has a good chance to become larger than 2(e.g. Sum of an independent QF and independent AA).  Fundamentally, such JV is anti-competitive but typically+selectively allowed by regulators if a mkt is sufficiently large and offers fully open+unlimited access to all current and potential players.....The U.S.-AU Trans-Pcf mkt is exactly that nature thx to their Open Skies agreement since 2008.

Regulators granted ATI to DL+VA JV yrs ago because even collectively today, they're still among the smallest players in that mkt(HA is probably the absolute smallest).  In contrast, QF+AA are collectively the largest player by far in that mkt(probably why ATI is not granted).  Independent QF and AA will grow slower  mainly because whenever they decide where to invest/deploy resources, they'll hv to 'guess' the actual costs+pricing strategy of each other even though they're code-sharing(totally legal & unrestricted) partners.  They'll still collectively hv the largest mkt share with or without JV and that's why impact is moderate instead of serious(e.g. imagine DL and VA without JV.....).

Consumers /Pax:
Slower growth means it'll take longer to see:
A) More frequencies on current QF or AA routes like=
DFW-SYD or LAX-BNE/MEL bulking up.

B) More new routes like=
MEL/BNE-SFO(Likely by QF as AA has no longhaul @ SFO) or DFW-BNE/MEL(Likely by AA as DFW is its largest fleet op base)

No JV also means less likely to see same/similar fares(Not necessarily higher or lower) across QF and AA.  Furthermore, possibly fewer schedule coordination to facilitate tighter connections(e.g. longer layover) between AA and QF flights.  All very minor impacts to pax.


LOVE your analysis! Thank you!

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