The U.S. Transportation Department on Monday said it granted tentative approval to American Airlines Group Inc and Qantas Airways Ltd to operate a joint venture, after a prior effort was rejected by the U.S. government in 2016.
The department issued an order tentatively approving the joint business agreement and tentatively granting antitrust immunity to the airlines covering international service. An application for a joint venture covering the United States, Australia and New Zealand was rejected by former President Barack Obama’s administration.
The deal would allow the airlines to co-ordinate their planning, pricing, sales and frequent flyer programs, with new options and customer service improvements. The department said the airlines planned up to three new routes within the first two years and increased capacity on existing routes.
The department will require the airlines perform a self-assessment of the joint venture’s impact on competition seven years after it takes effect and report their findings to the government, which could subsequently take action.
New deal before Trump administration
Regulators in Australia and New Zealand approved the first application for the joint venture before it was initially rejected by the U.S. Transportation Department.
American and Qantas in February 2018 made a second attempt to gain U.S. regulatory permission under President Donald Trump’s administration for a venture that would let them coordinate prices and schedules. They threatened to cancel services if it was rejected and argued it could “unlock” up to $310 million annually in consumer benefits.
The revised application made significant changes, including removing a provision that would have barred either carrier from code-sharing with other carriers. Code-sharing is an arrangement between airlines in which two or more carriers publish and advertise a single flight under their own flight number.
Claim reduction in fares to follow
The airlines argued in their 2018 application that the venture would lead to a reduction in fares and higher capacity as a “more viable third competitor” and require other carriers to respond with improvements in quality, schedules and prices.
Qantas said last year the joint venture would allow the two airlines to “significantly improve service” and “stimulate demand.” The airlines said the agreement could generate up to 180,000 new trips between the United States and Australia and New Zealand annually.
U.S. regulators in 2001 approved similar joint venture agreements for United and Air New Zealand Ltd and in 2011 for Delta Air Lines Inc and Virgin Australia