Qantas and American Airlines will fight a US transport regulator's decision to tentatively block an expansion of the pair's alliance which would have seen them fly more between Australia and the United States.

The Flying Kangaroo and the US airline struck a deal in mid-2015 for Qantas to fly between Sydney and San Francisco and for American to fly between Sydney and Los Angeles, connecting to a network of destinations on either end, in a tie-up that was to open doors to new markets for both.

But the US Department of Transportation issued a show cause order on Friday tentatively denying the airlines' application to expand their alliance because it could result in an unfair concentration of market power.

If the deal was allowed to go ahead, Qantas and American would control about 60 per cent of traffic between the US and Australia, the DoT said in its decision, noting that consumers would have few other competitive options on the under-serviced route.