Qantas and American Airlines forecast USD310m consumer benefit from joint venture

30 August, 2018

Qantas Airways and American Airlines issued (29-Aug-2018) a joint response to a request from the US Department of Transportation for additional information concerning their application for anti-trust immunity (ATI) for their proposed trans Pacific joint business agreement (JBA). According to the carrier's, if ATI is granted:

  • They will proceed with the proposed JBA, including revenue pooling that will align incentives to achieve consumer benefits;
  • There will be a consumer benefit of up to USD310 million p/a from increased connectivity, not counting improvements resulting from increased investment in travel to Australasia. If ATI is not granted, there will be a net consumer loss of more than USD440 million p/a, with consumers forgoing the above JBA benefits and potential consumer losses through route cancellations, and lost opportunities for increased investment in cooperation and travel experience;
  • Carriers will have incentives to engage in "blanket" codesharing across entire networks. Qantas and American have 436 codeshare segments within the proposed JBA, including 248 new codeshare segments not in operation. If the JBA is not approved, the parties could scale back cooperation;
  • Carriers will have incentives to add more routes, as well as additional frequencies on Los Angeles-Auckland, and more seats on Los Angeles-Sydney in the short term;
  • Carriers will retime flights to eliminate 'wing-tip' flying;
  • Carriers will make "heavy" investment in sales integration to make more lower fare seats available and eliminate double marginalisation;
  • Carriers will coordinate sales using combined network to provide greater competition and steeper volume discounts, especially for corporate customers;
  • Carriers will identify points of improvement in passenger service and invest in improved service to maximise combined traffic;
  • Frequent flyer programmes will return to more generous accrual rates, similar to American's favourable treatment of British Airways passengers. In response the the DoT's previous ruling not to grant ATI to the carrier's, they reduced their level of frequent flyer integration and benefits. [more - original PR]