DOT Continues to Spit Fire at American and Qantas, So They’ve Walked Away

Before the Thanksgiving holiday, I wrote about how the Department of Transportation (DOT) had tentatively denied American and Qantas’s joint venture plans. This was a surprise to many, but the story continues to get stranger. I would love to be a fly on the wall at DOT right now to understand what they’re thinking, because they just seem irritated.

On November 18, DOT issued a 23-page document outlining the situation and the reason for denial. As usual, interested parties were given 14 days to object to the initial decision, and then there would be another 7 days to file answers to those objections. American and Qantas took a look at the filing and the timeline, and asked for an extension. After all, one of those two weeks fell over Thanksgiving, so this was a compressed timeline to be able to actually formulate a comprehensive response to something that had been in this process for about a year and a half. So, the airlines asked DOT to give them an extra 18 days, until December 20. They proposed answers to those objections be due on December 30.

This didn’t seem like an unreasonable request. For example, as noted by American and Qantas in their request, 5 years ago Delta and Virgin Blue (now Virgin Australia) requested an extension and had it granted, and that wasn’t even over a holiday week. You wouldn’t think a couple of additional weeks would really matter in the scheme of things if it would allow Qantas and American the time they needed to put together a real response. DOT, however, disagreed strongly.

In its decision to deny the request, DOT was blunt and angry. “The movants have offered no compelling reason to alter the schedule that we have set, nor do we see any.” You can read the whole thing for yourself and see that there’s no question DOT has absolutely no sympathy for the airlines here.

This is strange since DOT itself hasn’t been able to stick to the timelines for considering the application in the first place. After 8 months of work, DOT announced on February 3 of this year that the filing was complete enough to be fully considered for approval. From that point, my understanding is that DOT had 6 months to review and rule. That means the decision should have been out on August 3, but it wasn’t. It took another 3+ months before DOT finally got around to handling this. Why DOT can’t stick to its schedule, I don’t know. But you’d think that if DOT can’t stick to its schedule, it should be able to give the airlines a couple weeks as well. I guess not. Then again, a ruling within 9 months would be a dream for Norwegian, which continues to sit and wait.

In the face of such a curt denial, American and Qantas basically decided not to bother. Being unable to put together a complete objection, the airlines simply withdrew their application. Some have speculated that this is just an attempt to wait out the Obama administration and hope for friendlier faces under a Trump administration. But the same people who denied the application will still be working at DOT after inauguration day. And I can’t imagine a swift policy change that would impact something relatively obscure in terms of importance in any new administration.

Were I a betting man, I’d guess that Qantas and American will eventually find a way to change the terms one way or another so that they can resubmit under new circumstances. That, of course, would be a business decision, and they might not even find it worthwhile, at least not for some time. Right now, they’re probably more stunned than anything. And more importantly, they have to focus their time and effort on dismantling the relationship they had built with Qantas under the previous joint venture since it is no longer allowed. They need to make sure they aren’t violating the law.

Eventually, I’d imagine they’ll find a way to come around again. But with the hostile environment between the airlines and the feds these days (massive slot divestiture requirement to approve Delta/Aeromexico joint venture and, of course, the still-pending Alaska/Virgin America merger), I don’t imagine we’ll see anything happen anytime soon. I just wish I could understand what the feds were thinking.