US Department of Transport denies Qantas-American Airlines alliance expansion

Australian national carrier Qantas, which is close to announcing a Perth-London direct Dreamliner flight, is battling with American Airlines a decision by the US Department of Transportation to tentatively block the expansion of the two air carriers’ alliance. The mid-2015 agreement would result in more flights between the US and Australia.

The planned additional routes were Sydney-San Francisco and Sydney-Los Angeles which would connect the flights of Qantas and American Airlines to a network of destinations on either routes. The tie-up was expected to open doors to new markets for the two airline companies, Sydney Morning Herald reports.

On Friday, the department issued a show cause order which tentatively rejected the application to widen the Qantas-American Airlines alliance because of its alleged unfair concentration of market power. DoT explains the deal would give the two airline giants 60 percent control of the US-Australia market, resulting in air travelers having fewer other competitive options on under-serviced routes.

“Qantas is by far the largest competitor operating between the United States and Australia, and American is likely the only remaining US airline positioned to enter and expand services in a competitively significant and timely manner, given its resources and network size,” DoT says.

American Airlines said it would fight the DoT ruling. “Other airlines have the significant competitive advantage of antitrust immunity in the US-Australasia market. With the same opportunity, American and Qantas will be able to compete more effectively and increase consumer benefits in the market,” the company says in a statement.

The DoT would accept submissions on its decision until Dec 2 before it makes a final ruling, The Australian reports. The Australian Competition and Consumer Commission approved in February the five-year alliance because it sees continued public benefits for air passengers between the US and Australia.