Qantas will scrap a code-sharing and loyalty points deal with American Airlines, in a move that will hurt customers but the carrier says will help convince United States authorities to approve a formal tie-up between the two companies.
The Flying Kangaroo confirmed on Saturday it would re-apply to the US Department of Transportation for immunity from anti-competition laws so it can launch a lucrative but as-yet elusive joint venture with American.
The DoT indicated it would reject Qantas' first application late last year because it would concentrate too much market share. That put a brake on the deal, which involved the airlines sharing revenue and marketing costs on trans-Pacific flights and scheduling new routes between Sydney and San Francisco and Los Angeles.
Speaking in Los Angeles on Saturday (Australia time), Qantas chief executive Alan Joyce said the airlines were close to re-filing its application to the DoT.
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In the meantime, it will cancel some existing co-operation, including code-sharing on overlapping routes, which it says will highlight to authorities the benefits of the airlines working together.
"It will mean people will not get the same status credits as they got on American Airlines aircraft, because we don't do that with any other carrier on routes without a joint venture," Mr Joyce said.
"So consumers lose out. We just need to go and make that very clear to the DoT, and that's the main case we'll be making: customer benefits that are associated with the alliance," he said. "This time around, we'll have a very strong case."
The DoT granted anti-competition immunity for joint ventures to Virgin Australia and Delta as well as Air New Zealand and United, but, in a tentative decision, would not accept Qantas and American controlling 60 per cent of the Australia-US market.
"We have bigger market share on other routes and there's still high levels of competition on those," said Mr Joyce, adding the initial coordination between the airlines had broken United's monopoly on the Sydney to San Francisco route and Air New Zealand's on Auckland to LA.
Mr Joyce made the comments while officially opened Qantas' new maintenance hangar at Los Angeles International Airport - a $US30 million ($40 million) investment in its growing trans-Pacific operation.
At 5.7 hectares and with a crew of 90 engineers, the largest commercial hangar in North America can service as many as four A380s or Boeing 747s at once, and will cut maintenance times by about 20 per cent, said Qantas International CEO Gareth Evens.
Mr Evans said conducting maintenance during long layovers would improve on-time performance out of Los Angeles, and had already freed up aircraft to fly direct from Australia to Dallas, Texas.
Mr Joyce said there was no material cost savings on wages by carrying out more maintenance in LA, but that Qantas could earn millions of dollars every year by renting the new hangar to other airlines.
Mayor of Los Angeles Eric Garcetti welcomed the investment in his city and its much-maligned airport.
"We want to see Australian investment in America, we want to see American investment in Australia, we want to see tourists go both ways," Mr Garcetti said.
The reporter travelled to Los Angeles as a guest of Qantas