US and Australia announce Open Skies agreement--article

[General Lee]

UPDATE 1-Australia, U.S. strike open-skies pact

Thu Feb 14, 2008 11:17pm EST
(Updates with Qantas reaction, analyst) By Rob Taylor CANBERRA, Feb 15 (Reuters) - Australia and the United States have agreed to open up trans-Pacific air routes between the two countries, prompting Australia's Qantas (Updates with Qantas reaction, analyst)

By Rob Taylor
CANBERRA, Feb 15 (Reuters) - Australia and the United States have agreed to open up trans-Pacific air routes between the two countries, prompting Australia's Qantas Airways Ltd (QAN.AX: Quote, Profile, Research) on Friday to immediately increase its flights.
Australia's Transport Minister, Anthony Albanese, said talks with U.S. officials in Washington had reached agreement on an open-skies pact, which could see more U.S. carriers fly to Australia via ports in Asia, such as Tokyo.
"This agreement will remove restrictions on competition for the benefits of Australian jobs and consumers," Albanese said in a statement.
The deal helps clear the way for Australian airline Virgin Blue Holdings Ltd (VBA.AX: Quote, Profile, Research) to begin flights to the United States on its carrier V Australia by the end of this year, edging open one of the world's most lucrative and protected long-haul routes.
But shares in Australia's flag-carrier Qantas slumped by 4.6 percent to A$4.53 at 0352 GMT on expectations the airline will face tougher competition on the prized cross-Pacific leg, on which it has a near-monopoly.
Qantas chief executive Geoff Dixon said the airline welcomed more competition and would add three extra flights from March.
"It brings new opportunities for growth and competition. Importantly, it will assist the further development of Australia's aviation industry, as well as help increase trade and tourism with a major economic partner," Dixon said.
United Airlines (UAUA.O: Quote, Profile, Research) is currently the only competitor to Qantas in non-stop flights to the United States. It runs 14 flights a week to Australia.
"KANGAROO ROUTE"
Qantas operates 48 flights a week, rising now to 51, and reportedly generates as much as 20 percent of its profits from the route.
A 2006 report for Singapore Airlines (SIAL.SI: Quote, Profile, Research) said Qantas charged 38 percent more for flights from Sydney to Los Angeles than on the competitive "kangaroo route" from Sydney to London.
The open-skies deal replaces an aviation treaty between Australia and the United States under which airlines based in either country were capped at four weekly flights on the route in the first year.
Virgin's V Australia, which is 62 percent owned by Toll Holdings Ltd (TOL.AX: Quote, Profile, Research), has asked U.S. transport officials for 10 weekly flights, having already placed an order for six long-range Boeing 777-300ERs with options to buy another six.
Australia's former conservative government rejected repeated requests from Singapore Airlines for permission to fly from Australia to the United States.
Albanese's centre-left Labor government, elected in November, has not yet said if it supports the entry of Singapore Airlines on the route. Singapore Airlines wants access to new markets to help offset competition from low-cost carriers in Asia.
Geoffrey Thomas, from Air Transport World magazine, said the pact would bring a significant increase to competition on the route, but said it had previously been served by up to four U.S. carriers. "It's a very tough market," Thomas warned.
But Thomas predicted new routes would open such as Sydney-San Diego and Brisbane-Seattle.
Australian travel agents predicted a price war on U.S. routes as competition increased.
Singapore Airlines estimates that opening the Pacific route to more competition could increase the number of travellers between the United States and Australia by up to 8 percent. ($1=A$1.11) (Reporting by Rob Taylor; Editing by Alex Richardson)



© Reuters 2008 All rights reserved



Will a combined Delta/NWA exploit this new authority? You bet. We would already hit every other major hot spot on the planet, and Australia would be next. Our new 777LRs could make it nonstop I bet.


Bye Bye--General Lee

 

[IronCityBlue]

So what do we (US airlines) stand to lose from this?

 

[Kenny]

So what do we (US airlines) stand to lose from this?

Of the 2 current carriers that fly between Oz and the US; UAL and QF, I think UAL has the most to lose. They're going to have get their act together as far as the level of service they provide is concerned.

I don't think there's really any doubt that most foreign carriers provide a far better product; UAL's sour FA's and old interiors that lack PTV aren't going to win them any new customers, especially when new entrants into the market have brand new aircraft.

 

[ultrarunner]

Qantas operates 48 flights a week, rising now to 51, and reportedly generates as much as 20 percent of its profits from the route.

Wow...that's some good coin a just a few flights!

 

[ultrarunner]

I'd agree with you there Kenny. I'll take QF down under and back any day over the "other" choice.

 

[On Your Six]

Only so many US airlines can actually operate routes between the two countries. Hawaiian through Honolulu, CAL through Guam, UAL nonstop from LAX. Given the level of competition from Qantas (51 747-400 flights per week) and V Australian in a few years, how many other US airlines will have suitable resources to compete?

I suppose DAL/NWA could throw a 777 in the ring if it had an available aircraft or two in a few years - perhaps 787s could be used to some of the mid-sized markets like Brisbane? CAL could also use upcoming 787s. Still, not many incremental daily flights would be expected - maybe 2-3 daily long-haul flights added. I am sure the cargo/freight carriers could benefit with more 747F flights per week.

The point is that Austrailia is sufficiently far away that not many US pax carriers will benefit in the short-to-medium term. Qantas, on the other hand, has ordered a huge number of 787s/777s that it could handily deploy in addition to its stable of 744s over the next few years - it should be the big winner after this agreement.

 

[Rez O. Lewshun]

I back the PAC!

 

[General Lee]

I see DL/NWA adding a 777LR to SYD, maybe from our hub in LAX, early next year maybe. (we get 6 new 777LRs within 3 months) United does have a lot to lose, since currently they are the only US airline that has feed in the US to support a long haul route like that. We could be the next, and our LA hub will have the chance to grow, thanks to all of the gates currently occupied by Expressjet ERJs. If we down gauge CVG or MEM, those planes could be sent Westward. And, our terminal 5 can handle a 777 in terms of space, since we have a daily one flying to ATL on a domestic run right now.


Bye Bye--General Lee

 

[SaabStory]

I back the PAC!

Maybe next year...they lost to the Giants remember....Nevermind, I thought it was a "K".

 

[3ds]

I see DL/NWA adding a 777LR to SYD, maybe from our hub in LAX, early next year maybe. (we get 6 new 777LRs within 3 months) United does have a lot to lose, since currently they are the only US airline that has feed in the US to support a long haul route like that. We could be the next, and our LA hub will have the chance to grow, thanks to all of the gates currently occupied by Expressjet ERJs. If we down gauge CVG or MEM, those planes could be sent Westward. And, our terminal 5 can handle a 777 in terms of space, since we have a daily one flying to ATL on a domestic run right now.


Bye Bye--General Lee

is it a matter of time before DL opens a lax 777 hub to service the far east? perhaps some direct options as well as some lower-priced flights with an ANC stop to carry additional freight that the nwa 747's can't handle?