Qantas shares hardly reacted to the news yesterday that it had abandoned one of its major offshore route strategies.
The airline announced that it would no longer try to get closer to US giant, American, across the Pacific.
The two airlines announced the ending of their attempts for closer links than the existing code-share arrangement that has been in place since 2011. The market took the news in its stride and Qantas shares lost 0.3% to end at $3.18.
That was after the key regulator, the US Department of Transport knocked back an expansion of the links between the two airlines that both had announced last year. That would have seen the duo splitting marketing expenses and sharing revenues on each others’ flights between Australia and New Zealand and the US.
The tentative knock back from the US side was easy to understand given that the alliance between the two would have dominated cross Pacific travel to and from Australia with a combined 60% share. But regulators in Australia and NZ approved the deal!
The decision came around 10 days ago and since then Qantas and American have been considering their positions after initially saying that would appeal the decision.
But yesterday both airlines said they would withdraw their application for anti-trust immunity because they could not respond to the US decision within the 14 days provided and were denied an extension.
“This is an extremely disappointing sequence of events for Qantas and American Airlines, as well as for customers, and ultimately for trade between the United States and Australia,” a Qantas spokeswoman told the media
"It follows approval from Australian and New Zealand regulators on the basis that our expanded partnership involved no detriment and would deliver significant benefits for consumers."
The two airlines had already started new routes as part of the deal, with Qantas flying to Dallas and from Sydney to San Francisco, and American flying between Sydney and Los Angeles. Now those (especially Sydney – San Francisco) are under review.
American Airlines spokesman Matt Miller said the DoT’s decision, 17 months in the making, was a significant departure from previous rulings.
“Delta and Virgin Australia, and United and Air New Zealand have anti-trust immunity in their joint ventures, so that’s a significant competitive advantage for those two alliances and that’s what we were seeking,” Mr Miller Fairfax Media quoted him as saying.
Qantas said last year talked up the deal saying it would increase its Australia-US mainland capacity by 9% ,but yesterday said the deal’s collapse would have no material impact on earnings.
In fact it will probably be seen as a positive as rising competition on all routes out of Australia have slashed fares as airlines strive to fill their planes.
The weak performance of Flight Centre (the country’s biggest travel agency group is testament to the impact of the intensifying competition, over capacity and the price cutting by Chinese airlines in particular).
