American Airlines-Qantas Airways Joint Business Approved by U.S. Department of Transportation

Compass Lexecon was retained by American Airlines and Qantas Airways to provide an economic analysis of the competitive effects of a proposed “metal-neutral joint venture” that would include joint capacity planning and pricing on flights between North America and Australia and New Zealand. Such joint ventures require a grant of antitrust immunity (“ATI”) by the U.S. Department of Transportation (“DOT”), which determines whether public benefits are likely to result from immunized cooperation and whether the benefits can only be achieved by granting ATI. On July 19, 2019, the DOT gave final approval to the application, via a Final Order adopting an earlier tentative decision. The DOT explained that “[a]fter examining the record before us, we tentatively conclude that [American and Qantas] have presented a persuasive case regarding the need for ATI to provide the claimed public benefits.”

The application for ATI submitted by American and Qantas relied heavily on a variety of Compass Lexecon studies which found that a grant of ATI would generate $221 million per year in consumer benefits from codeshare availability improvements; $89 million per year from fare reductions; and 180,000 new passengers per year stimulated by the additional codesharing and lower fares. The Compass Lexecon studies were presented in a report included in the ATI application. Compass Lexecon subsequently prepared additional studies for the DOT in response to follow-up questions from DOT staff.

In an e-mail to the Compass Lexecon team, American described the DOT findings as “huge for your clients, a significant step forward for the concept, the economics and the approach.”

Compass Lexecon economists involved in the preparation of the studies included Gustavo Bamberger, Lynette Neumann and Narsid Golic in Chicago; Mark Israel in Washington, DC; and Robert Calzaretta in Oakland.

In addition to in-house counsel for American, including Stephen Johnson, Bruce Wark and James Kaleigh, Compass Lexecon worked closely with outside counsel including Daniel M. Wall, Farrell J. Malone, Andrew Paik, Carla Weaver and Cassandra Martin from Latham & Watkins LLP and Dennis Schmelzer from Dechert LLP.