Air NZ objects to Qantas and American Airlines expansion
Air NZ only objector to Qantas and American Airlines expanding trans-Pacific alliance
By Fiona Rotherham
July 7 (BusinessDesk) - Air New Zealand is
the sole voice protesting against an application by Qantas
Airways and American Airlines for a co-ordinated increase in
flights on the trans-Pacific route, planned for the start of
the peak travel season in December.
Qantas and
American Airlines sought reauthorisation from the Australian
Competition and Consumer Commission last month for a 10-year
expanded joint business agreement (JBA), allowing them to
coordinate operations on the trans-Pacific route and boost
capacity between Australia and the US by 9
percent.
The Australian airline has upped the
competitive ante on New Zealand’s national carrier by
forging a closer alliance with American Airlines, adding
thousands of extra seats to its trans-Tasman services in
early spring, and plans to extend its budget offshoot
Jetstar’s services in New Zealand to four regional
destinations later this year.
The ACCC previously
authorised a similar five-year arrangement between Qantas
and American Airlines in September 2011. The interim
authorisation for an extended JBA is being sought now
because of American Airlines’ plan to fly between Los
Angeles and Sydney from December. That’s the peak time for
tourists on the trans-Pacific route and when the airline has
relevant aircraft becoming available it doesn’t want to
sit idle.
An extended alliance would let Qantas resume
services on the Sydney-San Francisco route and the partners
have also indicated they want to break Air New Zealand’s
lucrative monopoly on flights between Auckland and the
mainland US by flying Auckland-to-Los Angeles as early as
next year. Air New Zealand currently attracts Australian
passengers onto its trans-Pacific flights via a stop in
Auckland.
In a submission to the competition regulator, Air New Zealand said it was inappropriate to grant interim authorisation without a full and considered analysis by the ACCC. Qantas and American Airlines already had authorisation to coordinate on designated routes under the original JBA which is valid to June 2016, it said.
“If either
party wants to start a Sydney-San Francisco service they can
do so alone or with the support of the other through
codeshare, block space, wet lease, or other arrangements,”
Air New Zealand said.
While any delay to full
cooperation between the parties could result in a “less
than optimal launch of these services from the parties’
perspective”, this delay has only been caused by the
parties themselves not allowing sufficient time for the
authorisation process, Air New Zealand submitted.
Given changes to the operating environment since the 2011 authorisation and the successful reorganisation of American Airlines since then, the ACCC should carefully consider whether American Airlines would enter any of the joint venture routes in the absence of the alliance, it said.
In response to third party submissions, Qantas
and American Airlines said the interim authorisation would
allow them to operate under the existing JBA with the new
trans-Pacific routes added in, until final antitrust
immunity is received.
Comments on the proposed
additional capacity have been “overwhelmingly positive”,
it said with only Air New Zealand raising any
objection.
“Air New Zealand’s stated concerns must be viewed in the context of the strategic advantage it would enjoy from delaying or diluting the success of the introduction of the applicants’ new joint services,” they said.
It wouldn’t be commercially feasible to launch the new services separately to the existing coordination as Air New Zealand suggested given they manage trans-Pacific routes as a whole rather than on a route-by-route basis, Qantas and American Airlines said.
“Pricing, sales, marketing, and revenue
management are inter-related” and it would be commercially
impractical to carve out a single route such as
Sydney-to-San Francisco from its other flights, even
temporarily.
They claim Air New Zealand would be a major beneficiary of any delay or dilution of the success of the new services which won’t cause competitive harm, particularly given the intensity of competition on the trans-Pacific routes.
Other submitters, including various Australian airports and Tourism Australia, welcomed the extra capacity the flights would bring between the United States and Australia, saying it was critical to achieving Australia’s tourism objectives.
Qantas and American Airlines have also applied for interim authorisation in New Zealand and the United States.
NZ’s Ministry of
Transport said applications are assessed for their potential
impact on the New Zealand market, and material relating to
the application will shortly be posted on its website.
The ACCC is due to make a draft determination next month and a final one in October/November.
Air New Zealand shares rose 0.4 percent to $2.56, and have gained 3.2 percent this year.
(BusinessDesk)