Take off: Virgin not expected to object to Qantas, American tie-up

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Take off: Virgin not expected to object to Qantas, American tie-up

By Patrick Hatch

Virgin Australia is unlikely to make a last-ditch attempt to ground a commercial tie-up between Qantas and American Airlines after a US regulator signalled it would approve the joint venture, which it previously held up over fears it would be anti-competitive.

The US Department of Transportation this week “tentatively approved” the partnership, which would allow the two carriers to effectively run a combined business on the trans-Pacific.

Virgin is unlikely to oppose the deal between Qantas and American Airlines.

Virgin is unlikely to oppose the deal between Qantas and American Airlines.

While Qantas and American are long-time code-share partners, the joint venture will let them share revenue from each other's flights, and work together on route planning, pricing, sales, marketing, and frequent flyer programs.

Parties that object to the tie-up have until June 17 to make submissions to the department before it makes a final decision. Sources close to Virgin said the airline did not intend to lodge an objection.

An Air New Zealand spokeswoman, meanwhile, said the carrier was reviewing the US decision.

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Joint ventures are already in place between smaller players Virgin Australia and Delta, and Air New Zealand and United.

The Qantas-American deal has been in the works since 2015, but the US Department of Transportation (DoT) held it up in 2016 because of concerns it would concentrate too much market power on Australia-US routes.

Qantas and American made a second application in February 2018 which argued the market had changed since its first attempt, with their competitors launching new routes between Australasia and North America.

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The application also stressed how the partnership would benefit consumers by increasing capacity, reducing travel times and “increasing competition”.

Qantas has said it would start new routes including from Brisbane to San Francisco and Chicago if the deal is approved.

Qantas chief executive Alan Joyce  said the tie-up 'would bring significant benefits to millions of travellers and a boost to tourism'.

Qantas chief executive Alan Joyce said the tie-up 'would bring significant benefits to millions of travellers and a boost to tourism'.Credit: Bloomberg

The DoT said the public benefits from the partnership might be limited by Qantas and American’s already high (44 per cent) market share, along with “the low probability of new entry, the lack of competing hubs between the United States and Australasia, and the challenge of stimulating traffic in an ultra-long-haul market”.

In its tentative decision, the US regulator has imposed conditions for Qantas and American to report annually on their joint venture.

And after seven years, Qantas and American will have to present a “self-assessment” of their partnership to the US transport authority, showing that it had delivered the consumer benefits their application claimed it would.

The two airlines have said flyers would get benefits worth $400 million a year from the joint venture, by connecting to more destinations on each other's networks and giving access to cheaper fare classes when code-sharing.

Qantas chief executive Alan Joyce said the airlines had "submitted a compelling proposal to the DoT that would bring significant benefits to millions of travellers and a boost to tourism".

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