Qantas and American Airlines partnership to slash US fares


A PROPOSED alliance with American Airlines will cut fares to almost two-thirds of US destinations and $700 off the cost of flying to four major ports, Qantas has told the Australian Competition & Consumer Commission.

The airline says its proposed joint business arrangement would also allow a “Walkabout Pass” for those travelling to the US from Australasia on joint Qantas/AA flights.

A table included in the airline’s submission to the ACCC shows Philadelphia, Minneapolis, Indianapolis and Detroit as the cities that would benefit from a $700 reduction on current fares but shows Seattle, Washington DC, New Orleans and Boston as destinations that would see lesser price cuts.

“The refined structure will be simpler to manage and communicate to consumers and trade,” the submission says. “It will result in fare reductions for 64 per cent of US destinations and will allow a broader offering of discounted tactical fares to an increased number of destinations as well as expanded stopover options between gateway cities in the US and end destinations.”

The joint business agreement, flagged in January, would be similar to the long-standing joint services agreement Qantas has enjoyed with British Airways and comes a day after Virgin Australia’s alliance with Delta Air Lines received a provisional tick from the US regulator.

As well as more competitive fares and new products, the airline says the joint business arrangement would allow joint strategic planning and management of services across the Pacific as well as in North America and Australia-New Zealand.

Other benefits would include improved marketing, flight schedules, frequent flyer offering, frequencies and connection times.

But Qantas is making its application from a position of competitive strength, with 46 per cent of passenger market between Australia and the US when Jetstar flights to Hawaii are included.

Although Qantas’s market share has fallen from 58 per cent in recent years, it is more than double the 17 per cent expected within two years for the Virgin-Delta alliance and an estimated 22 per cent for United Airlines.

But according to AA, it has no intention of entering the route and the airlines argue this means it is not a true competitor and there is no detriment to competition from the deal. They argue that an enhanced relationship is needed to reinvigorate competition and say they would continue the existing codeshare if the alliance is rejected, but it would have “inherent limitations”.

They note also that they would be the only direct carriers on trans-Pacific routes that are not part of an immunised alliance.

“Without immunity, the applicants would continue to act independently and duplicate each other’s marketing and sales effort while offering an inferior network, schedule, capacity and frequent flyer offering and a less efficient procurement process,” it said.

The airline wants the agreement to apply to services between the US and Australia/New Zealand, within the regions and beyond to third countries such as Canada and Mexico.

It said the deal would result in significant benefits to consumers and allow the airlines to maximise the benefits of Qantas services to AA’s major hub at Dallas Fort Worth. Four services a week start from Monday.

Qantas has filed an application for authorisation of the joint business arrangement with the ACCC and will file an application with the New Zealand Minister of Transport. The US Department of Transportation will review the agreement.

At present, Qantas offers 41 scheduled round trip flights a week between Australia-New Zealand and the US.

These include 33 weekly flights to Los Angeles, four weekly flights to Honolulu and the four weekly flights starting next week to Dallas Fort Worth. Qantas also offers six weekly flights to New York via Los Angeles.
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