ATI denial for Qantas/American Airlines will be “injurious”: DFW

JetBlue Airways urges ATI time limitations

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Dallas/Fort Worth International Airport (DFW) has insisted US Department of Transportation (DOT) approve a bid by Qantas and American Airlines to expand and strengthen their existing codeshare arrangement, saying failure to do so will be “injurious” to the airlines, consumers and competition.

In a submission to the US Government, DFW – which is also the headquarters of American Airlines  urged the Trump Administration to not delay on handing down a favourable response. The feedback comes as the US Department of Transportation created a procedural schedule ahead of its decision earlier this month.

Qantas and American Airlines applied for antitrust immunity (ATI) on services between the USA and both Australia and New Zealand in February. The proposed Joint Business Agreement would enable the carriers to revenue-share on flights across the Pacific, one of many planned benefits of the bolstered partnership. At the time of their application, the airlines indicated Qantas’ flights between Sydney and DFW and American Airlines’ service from Los Angeles to Sydney could be in jeopardy if their joint venture was refused.

In the 21-page submission, Dallas/Fort Worth International Airport said: “Denial of the Joint Application would perpetuate the competitive disadvantage facing the Joint Applicants, and effectively force the eventual termination of Qantas’ critically important DFW-Sydney service, a result which would be squarely at odds with DOT precedent and policy, and would harm, not protect, competition.”

The airport said already ATI-immunised services with British Airways between DFW and London Heathrow and with Japan Airlines to/from Narita, have “driven important growth in air service at DFW”.

DFW said that 85% of traffic on the DFW–SYD route is traffic either connecting to points behind or beyond these gateways, or both, which is 20% higher than the next US-Australasia route.

“Without the feed traffic connecting over DFW and SYD, there are no DFW–SYD route economics that would make this route viable because the local market is simply too thin to support its operation. In the absence of connecting traffic at both ends, the DFW–SYD route would simply be unsustainable,” Dallas/Fort Worth argued.

The Texan airport highlighted the benefits similar transPacific alliances between Virgin Australia and Delta Air Lines (since 2011), and United Airlines and Air New Zealand (since 2001), saying alliances have “shaken up the market and vastly improved the service options to U.S. consumers.”

“The public interest would be greatly advanced with the creation of a third strong competitor in the US–Australasia market. In order to continue to thrive, DFW must be able to compete with other US airports which enjoy access to Australia and to the Australasia region.”

“It is essential to note that over time, the market share of Qantas has diminished quite considerably, with the competing alliance groupings (UA/NZ and DL/VA) each establishing very firm competitive footholds in the market. The previous three carrier market has been transformed into a vibrant and highly competitive six carrier market.”

DFW further noted that while Hawaiian Airlines opposed the initial joint venture between Qantas and American Airlines that was knocked back two years ago, the Honolulu-based carrier has not voiced similar concerns with this application, the reason being Hawaiian Airlines has since sought antitrust immunity with Japan Airlines on flights between Hawaii and Japan.

Other points argued by Dallas/Fort Worth if ATI approval is denied again and Qantas chooses to abandon its SYD–DFW route included:

  • Competition between Australasia and Texas from Air New Zealand’s Auckland-Houston route
  • Competition to central USA, with Air New Zealand’s freshly minted Auckland-Chicago route
  • Longer flight connections (of up to 4.5 hours) via Los Angeles for travellers, and
  • Loss of another potential non-stop service from DFW to Australia, likely the mooted Melbourne route

“A withdrawal of service would eliminate competition from an important Australia gateway and will effectively reduce the number of competitors east of the US West Coast from two players (UA/NZ and AA/QF) to just a single participant: UA/NZ. This would be injurious not only to American and Qantas, but also to consumers and competition,” the US airport said.

Separately, New York-based JetBlue Airways told the DOT if it approved, it should “limit any joint venture approval to a period of three to five years, with the possibility of renewal.”

“The Department had serious enough competition concerns to reject the ATI request in 2016. If the Department ultimately reverses course and grants ATI now, a time limitation would be a prudent way to allow regulatory authorities in the United States, Australia, New Zealand and elsewhere the opportunity to monitor the alliance and ensure that the public interest is not being harmed over time,” JetBlue said.

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