When American announced Sydney service starting in December, they did so as part of an enhanced joint venture with Qantas.

Sydney Opera House

Qantas didn’t have the aircraft to serve San Francisco. By turning over a Los Angeles flight to American, they have shuffle aircraft and serve a new U.S. market.

American has also announced a new flight to Auckland, New Zealand as part of the joint venture.

American’s current access to Boeing 777-300ERs make right-sizing Sydney flights, where Qantas believes it has too much capacity, possible. And Boeing 787 aircraft makes American’s Auckland possible (along with their domestic US feed and Qantas’ base of customers on both sides of the Tasman Sea).

American 777-300ER Business Class

View of the Wing: American Airlines Boeing 787

Although American’s new Sydney flight launched a week ago and Qantas has touched down in San Francisco, the Department of Transportation has yet to approve the tighter cooperation between the two airlines. Instead, after several months, the DOT requested more information.

American and Qantas filed their response to the DOT last week. Depending on your perspective it makes either fascinating or incredibly boring reading.

Small pieces are redacted, almost like a Department of State email dump. The filings are public but some pieces of information don’t have to be shared publicly. Still, we do get some insights into current thinking.

Two new routes are planned for the joint venture between mid-2016 and 2018, and a third new route for 2019.

Qantas has suggested one of those routes could be Sydney – Chicago.

They plan increased frequency on existing routes

[M]uch of the new capacity is generated from new American-operated service on LAX-AKL and substantial capacity increases on other routes (e.g., [redacted] and [redacted] ), driven by increased frequencies on those routes.

So far Sydney – Dallas has gone from a scheduled 6 Airbus A380s per week to 7 (they had 7 flights a week 15 months ago when the flight was operated by a Boeing 747).

American says they would kill their Sydney flight if the DOT doesn’t approve the joint venture.

Although American has already marketed flights for LAX-SYD and must honor those operations in the short-run, this operation—like all other joint services—simply cannot survive without immunity. American is currently unable to forecast precisely when its LAX-SYD service would be pulled down if the Parties’ Application were to be denied.

They also say Qantas would scale back its existing U.S. flights.

The Parties anticipate a sharp reduction in Qantas-operated flights involving the U.S. absent a grant of antitrust immunity, including the end to Qantas’ service between Australia and both Dallas/Fort Worth and San Francisco.

This makes no sense, as without an approval the status quo should prevail — Qantas upgauged Dallas to an A380 six times a week from a Boeing 747 a year before the two airlines flew their first flights under the planned enhanced joint venture. While Qantas needs American’s connectivity at Dallas for their flight to work, they have that connectivity without the enhanced joint venture and have had it for years (through the oneworld alliance, the 2011 joint venture, and through interline ticketing agreements).

In other words, this is a stretch even if the existing joint venture were eliminated. It seems to me a misreading of the DOT’s question, but I’m sure American’s lawyers would disagree.

The joint venture includes Qantas’ Los Angeles – New York flight, but excludes Sydney – Hawaii flights

There’s virtually no connecting traffic beyond Honolulu, according to the filing, and it’s excluded (it would surprise me if everyone flying the Qantas Sydney – Honolulu service stays in Honolulu, though their connections aren’t generally going to be on American in any case).

One of the public benefits is new routes for mileage earning and redemption.

Of course, for the redemption claim to be true, American really should have to release a single premium cabin award seat during the entire year. Although American AAdvantage explicitly disclaims any duty of good faith or failing dealing towards its members, they’re promising the DOT that if the joint venture is approved members can redeem awards.

Strictly speaking of course members can redeem points. Even when business class is 3/4ths empty four hours from departure, one-way awards run 215,000 miles.

This hadn’t occurred to me, but makes sense..

Exclusivity provisions limit doing business with carriers on each others’ continents

American can’t enter into a frequent flyer arrangement with Virgin Australia or Air New Zealand. Qantas can’t enter into one with United. That is, without the other airline’s consent ‘which shall not unreasoanbly be withheld’. Existing arrangements are carved out as exceptions however renewing those arrangements requires consent.

This means the future of the Alaska-Qantas agreement is in American’s hands.

Renewals of those agreements, as well as certain changes to those agreements (such as expanding those agreements into routes within the scope of the joint business) would be subject to consent of the Parties.

These exclusivity provisions apply to Hawaii, even though revenue sharing does not. So Qantas arrangements with Hawaiian are similarly subject to future veto by American.

Given that Australia and New Zealand have already signed off, and service has started, I expect the joint venture to be approved. The DOT would hate to be blamed for the elimination of American’s service to Sydney and Qantas’ service to San Francisco. The only question, I suspect, is whether DOT thinks they can extract something of value in exchange for their sign-off.