Should the Qantas-AA application be approved?

QF AA VA DL.jpgThe crux of Qantas and AA’s joint business agreement (JBA) application is if the two carriers should be granted greater leveraging power by being able to coordinate prices and capacity. Everything else in the application, which the carriers are eager to talk up, can be done without approval, and even without approval Qantas and AA could reduce fares by doing more labour-intensive work, such as making more inventory buckets available, and offer greater flight options by researching connecting services and adjusting appropriately.

The Qantas-AA application ironically pleads for approval as “the proposed Virgin/Delta joint venture is likely to further reduce their market share as Virgin and Delta have indicated that their joint venture supports the introduction of further new Trans-Pacific services.”

Qantas and AA are concerned about Virgin and Delta and so are requesting approval for greater coordination to combat Virgin and Delta, who two years ago were concerned about Qantas and AA and so requested approval for greater coordination to combat Qantas and AA. Is the current balance between the trans-Pacific operators fair or skewed?

The application states AA has no intention of deploying its metal on the trans-Pacific route, sometimes saying so twice on one page. With AA not serving the trans-Pacific route, the application argues that Qantas and AA “are not true competitors on the these routes and there can be no detriment to competition resulting from the implementation of the Proposed JBA.”

But therein lies the competitive problem: JBA approval would give AA no incentive to enter the trans-Pacific market. In other alliances that required regulatory approval–oneworld and Star across both the Pacific and Atlantic, British Airways and Qantas between Australia and the UK–all parties involved flew the route.

Will the limited Qantas-AA application, comprising one applicant who flies the trans-Pacific route and one who does not, give the pair an unfair advantage over the more comprehensive agreement between Delta and Virgin, both of whom fly the route?

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