(Adds airline and analyst comments, background)
WASHINGTON, Nov 18 (Reuters) - Plans by American Airlines Group Inc AAL.O and Qantas Airways Ltd QAN.AX to expand their alliance for flights between the United States and Australasia were tentatively denied by the U.S. Transportation on Friday, the agency said, citing competition concerns.
The carriers submitted their application in June 2015, several months before American started flights between the United States and Australia. The partners had been marketing flights on routes that the other did not offer, and requested immunity from U.S. antitrust law in order to coordinate prices and schedules.
The Transportation Department said in a statement that air travelers would have few remaining competitive options if the alliance were expanded, "given the scale of the resulting joint business."
The alliance would have the largest share of seats between 200 pairs of cities, and account for nearly 60 percent of all seats between the United States and Australia, the department said.
The airlines started sharing codes on each other's flights in 1989, co-founded the oneworld marketing alliance in 1999 and formed a deeper partnership in 2011 without antitrust immunity, the regulator said.
American said in a statement it would file an objection, noting the department's "significant departure" from its prior decisions.
"Other airlines have the significant competitive advantage of antitrust immunity in the U.S.-Australasia market," American said.
Denials of requests for antitrust immunity are rare, said Henry Harteveldt, founder of the travel consultancy Atmosphere Research Group. However, the United States has become increasingly concerned about protecting consumers as the industry has consolidated through mergers and alliances, he said.
"It's made it more difficult for unaffiliated airlines to compete," Harteveldt said.