It looks like American and Qantas are being granted their wish, as the Department of Transportation has approved the joint venture that they’ve been wanting for years.
What is a joint venture?
A joint venture is the highest level of cooperation you can have between two airlines.
When airlines form a joint venture they coordinate pricing and schedules in a given market, and have a revenue sharing agreement. Exactly how that revenue sharing agreement works depends on the specific situation, but the idea is that two airlines are essentially acting as one under a joint venture.
Note that typically airlines form joint ventures between specific regions, which is why this is different than an outright merger. For example, American has a transatlantic joint venture with British Airways, Finnair, and Iberia, while they also have a transpacific joint venture with Japan Airlines.
From the perspective of a consumer, a joint venture is both good and bad:
- The good news is that typically it gives you the most flight options in terms of schedules, since the airlines are operating as one; airlines also often try to make the experience as consistent across brands as possible
- The downside is that it’s like a competitor being eliminated in the market, so it could lead to higher fares as it reduces competition
The history of the American & Qantas joint venture
It has been quite a rocky road for American and Qantas to get to this point:
- In early 2016 American & Qantas filed for a joint venture, though it was blocked under the Obama administration
- In early 2017 American & Qantas scaled back their partnership; they were basically taking away benefits so that they could later show the DOT the benefits they’d be able to add if the joint venture were approved
- A few weeks later American & Qantas filed for a joint venture again, hoping that the Trump administration would be more likely to approve it
- After the application had been sitting for a while without approval, American & Qantas withdrew the application
- Then in early 2019 American & Qantas filed for the joint venture yet again
Qantas’ 787 business class
American & Qantas joint venture approved
Today the American & Qantas joint venture has been tentatively approved. The DOT has decided that this will protect competition and promote public benefits, including additional flights and increased seat availability.
As a condition of the approval, the DOT is proposing that American and Qantas report annually on the progress of their cooperation. This would allow the DOT to determine if this partnership is really in the public’s interest.
American’s 787-9 business class
What could change with this joint venture?
Once this joint venture is finalized, I imagine we’ll see a few changes, including:
- Improved mileage earning between American AAdvantage & Qantas Frequent Flyer (again, they cut mileage earning when the previous application was denied)
- Currently American’s Los Angeles to Sydney flight is operated by a 787-9, though I imagine we could see a capacity upgrade to a 777-300ER
- Currently American’s Los Angeles to Auckland route is seasonal, so I imagine we could see this go year-round again
- Qantas has been talking about launching nonstop flights to Chicago, so maybe we will finally see that launch
- While this is far from a sure bet, we could maybe see American operate flights on their own metal to Brisbane and/or Melbourne
- Over time we could see fare increases, since this joint venture is the equivalent of a competitor being eliminated in the market
Could we see a Qantas 787 flight from Sydney to Chicago?
I know American and Qantas must be excited about this, given that they’ve been working towards this for years. While I’m generally not in favor of more joint ventures due to the impacts they generally have on pricing, I am hoping that this joint venture leads to some new routes and capacity increases.
Maybe we’ll see American go year-round to New Zealand again, and hopefully we’ll see some new routes between the US and Australia.
What do you make of the American & Qantas joint venture being approved?