The expansion of the alliance has been given interim approval by the Australian regulator - in spite of objections by Air New Zealand and Hawaiian Airlines - and is now before the Transport Ministry because of the potential impact on this market. Interested parties have just days to lodge submissions.
While the application relates to more flying between Australia and the US, the airlines say it provides the basis to expand even further, including flying directly between New Zealand and the US.
Air New Zealand has had direct flights to itself since Qantas pulled out of a loss-making Auckland-Los Angeles service in 2012. While the number of indirect flights between Auckland and the US mainland has grown it is widely acknowledged that every day without a direct competitor is a good day for Air New Zealand. When American Airlines said in June it would investigate direct flights to New Zealand Air New Zealand's share price took a hammering, although it has recovered since. Air NZ is also facing increased competition on its popular Vancouver route, with Air Canada announcing flights from the Canadian city to Brisbane.
The American-Qantas application says they regard Air NZ as a "significant competitive constraint" on the transpacific routes.
Air New Zealand attracts a large number of passengers who fly across the Tasman to join services to the United States from Auckland.
In the past financial year about 350 passengers a day flew across the Tasman to link to US services.
Benefits the applicants say are significant include:
Improving connectivity and increasing schedule choice for passengers flying from Australia/New Zealand to destinations within the US, Canada and Mexico.
Improving services for customers including lounge facilities and co-ordinated customer service.
Eliciting a competitive response from rivals on transpacific routes.
Promoting tourism in Australia and New Zealand and enhanced international trade opportunities.
The applicants say Transport Minister Simon Bridges has the scope to authorise the application and there are significant and substantiated public benefits.
Approval for applications such as these in the past has taken up to six months, just before the time the airlines plan to start their new schedules. This would result in Qantas resuming flights from Australia to San Francisco and American using its new Boeing 777-300 on the Los Angeles-Sydney route.
At the end of this year Air NZ plans to expand its range of US destinations, with three times a week flights to Houston as it looks to open up the southern states and provide connections with the eastern seaboard. Interested parties have until the end of this week to make submissions to the ministry.
Fight over the Pacific
What's driving increased airline competition over the Pacific this year?
The resurgence of Qantas whose long-haul airline was in dire straits just two years ago means the Australian carrier is cautiously expanding. By deepening its alliance with American Airlines (another airline that is back from the brink) it is able to put off immediate investment in expensive new planes to expand its US network and get back to San Francisco. Fuel prices are relatively low, helping all airlines flying long haul services. Air NZ is also expanding its US network with flights to Houston later this year.
What does this mean for Kiwi passengers?
More flights if they want to go to the US via Australia in the first instance but more importantly it opens up the prospect of American Airlines coming here. This would provide direct competition to Air New Zealand on direct Auckland-US routes and invariably this means lower fares.
What is the prospect of American Airlines coming here?
Air NZ will defend its patch aggressively with fares and the falling kiwi dollar will mean less leisure travel heading northbound to the US. However, American will be noting the US market to New Zealand (and Australia) is rebounding strongly and these travellers are more likely to fill premium seats where airlines make their money.
What now?
Australia's competition regulators have given interim approval to the American-Qantas alliance. This country's Transport Minister will also assess the deal's impact on consumers and NZ overall.
