Qantas cans San Francisco flights

Qantas Airways has bailed out of an ambitious deal with American Airlines that would have increased trans-pacific traffic for both carriers, after a United States regulator blocked it on competition grounds.

The expected expansion of flights between Sydney and Los Angeles and the introduction of a Qantas Sydney to San Francisco service had been vehemently opposed by Air New Zealand, but had gained approval from NZ and Australian regulators.

But the US Department of Transport earlier this month tentatively knocked back an expansion of the airlines’ alliance, announced in mid-2015, because it would have tied up about 60 per cent of traffic between Australia and the US, unfairly concentrating market power.

Qantas and American Airlines initially said they would appeal the decision, which would severely limit their ability to work together.

But on Tuesday the airlines said they would withdraw their application for anti-trust immunity because they could not respond to the Dot’s decision within the 14 days provided and were denied an extension.

‘‘This is an extremely disappointing sequence of events for Qantas and American Airlines, as well as for customers, and ultimately for trade between the United States and Australia,’’ a Qantas spokeswoman said.

‘‘It follows approval from Australian and New Zealand regulators on the basis that our expanded partnership involved no detriment and would deliver significant benefits for consumers.’’

The airlines had already started new routes as part of the deal, with Qantas flying to Dallas and from Sydney to San Francisco, and American flying from between Sydney and Los Angeles. That had driven fares down on those routes, the spokeswoman said.

Qantas last year said the deal would increase its Australia-us mainland passenger numbers by 9 per cent. It will now assess its trans-pacific network.

American Airlines spokesman Matt Miller said the Dot’s decision, 17 months in the making, was a significant departure from previous rulings.

‘‘Delta and Virgin Australia, and United and Air New Zealand have anti-trust immunity in their joint ventures, so that’s a significant competitive advantage for those two alliances and that’s what we were seeking,’’ Miller said.

‘‘With that opportunity we would have been able to compete more effectively and increase consumer benefits in the market as well.’’

Qantas and American’s codeshare arrangement, struck in 2011, will remain in place.