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American and Qantas threaten cuts without joint venture

American Airlines and Qantas Airways are threatening further schedule reductions between Australia and the USA if the latter does not grant them antitrust immunity for a joint venture.

The Oneworld Alliance carriers say Qantas has reduced capacity between Dallas/Fort Worth and Sydney, and American between Los Angeles and both Auckland and Sydney, in a response to US Department of Transportation questions on their application on 29 August. Qantas will reduce Dallas/Fort Worth-Sydney frequency to six-times weekly from daily in February 2019; and American has shifted Los Angeles-Sydney to a Boeing 787-9 and a large Boeing 777-300ER, and reduced Los Angeles-Auckland to seasonal from year-round status.

"American recognised that further reductions in codesharing would have been beneficial to American’s service in the short-run, but given the parties’ intent to re-file for [antitrust immunity], and to avoid additional loss of goodwill from abandoning routes, they have maintained a greater level of service and cooperation than they would if there was no hope for implementing the proposed joint venture," the airlines say suggesting at further reductions, including possibly exiting markets, without a joint venture.

American and Qantas reapplied for immunity from US regulators in February, a little more than a year after the DOT under the Obama administration rejected their first request in November 2016. Approval would allow them to coordinate schedules and fares, pool revenues and expenses, and jointly sell and market flights between Australia and the USA.

The carriers argue that a joint venture would create up to $310 million in consumer benefits for US travellers, including improved and increased service in the market, and stimulate the market by up to 180,000 additional passengers annually.

American and Qantas fail to mention the latter's new Melbourne-San Francisco route, despite their discussion of reductions in Los Angeles and Dallas/Fort Worth. Qantas will begin six-times weekly service in the market in September, a move that was announced a year after their first immunity application was rejected.

The airlines say more growth to the USA was planned by Qantas with its Boeing 787s prior to the first rejection, in their response. They add that those aircraft are being used to Hong Kong instead.

American and Qantas paint a dire picture of their codeshare without a joint venture. They say it would be in both parties' interest to significantly limit it due to their competition on the Los Angeles-Sydney route, presenting a worst-case-scenario of reductions.

Qantas still plans US growth even without a joint venture with American. Its chief executive Alan Joyce said earlier in August that they are considering new flights to Chicago, Dallas/Fort Worth or Seattle, with the former two – both American hubs – likely under an immunised partnership and the latter likely without one.

“We still maintain confidence that we will get [antitrust immunity] and that will help with making a good decision on what the route should be,” said Joyce.

American is also optimistic on DOT approval. Stephen Johnson, its executive vice-president of corporate affairs, said in July that they expect a favourable nod from the regulator by the end of the year.

Delta Air Lines and Virgin Australia already have a joint venture between Australia and the USA, and Air New Zealand and United Airlines have one between New Zealand and the USA.

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