19th December 2008, 09:51 AM
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Join Date: Apr 2008
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From smh.com.au
Quote:
Delta to compete with Qantas on Sydney-LA routeScott Rochfort
December 19, 2008 - 10:19AM
The world's biggest carrier Delta Air Lines has confirmed its plans to launch flights from Los Angeles to Sydney in July next year, a move tipped to trigger the first serious air fare battle on the Qantas-dominated route in more than a decade.
Delta announced overnight it would commence a daily Boeing 777-200 flight on the route on July 1.
Combined with V Australia's plans to fly to LA in February, Delta's arrival is not only expected to boost the number of seats on the route but also dramatically lower airfares.
V Australia already appears to have pre-empted Delta's announcement by slashing its fares by 45 per cent through its $1199 fare (including taxes) sale which was launched on Wednesday.
Delta is yet to announce what introductory fares it will offer from Sydney. But from the US, Delta is offering one-way fares from LA to Sydney for US$499 ($730) including taxes.
The launch of the Sydney service will make Delta the first US airline, since the now defunct Pan Am, to fly to six continents.
Delta and V Australia's entry will end the cosy duopoly enjoyed by Qantas and United Airlines on the route since Air New Zealand suspended its Sydney to LA service in 2003.
But the US carrier's entry is set to frustrate V Australia's launch on the route.
V Australia has already pushed back its launch date from December to February, and Delta's entry, coupled with the global economic slowdown, could make it even tougher for the Virgin Blue long-haul airline to make a profit on the route.
Aside from flooding the route with more seats, Delta could capture more traffic given its membership of the world's second largest airline alliance, SkyTeam. Unlike V Australia, it is also a well-known brand in the US.
Delta's entry could also spell an end to the bumper profits and domination Qantas has enjoyed over the route for the past decade.
A spokesman for the federal Minister for Transport, Anthony Albanese, said the Government was yet to hold talks with the airline.
But thanks to an open skies treaty signed between Australia and the US early this year, Delta will have the right to start daily services almost immediately. United Airlines is the only other mainland US carrier to fly direct services on the route, from which Qantas makes an estimated 20 per cent of its profits.
The number of seats on the route is already set to increase on route even without V Australia and Delta's entry. Qantas has recently deployed its second A380 superjumbo on the route, which has 100 more seats than the 350-odd seat 747-400s it has used on the route since the early 1990s.
Delta's arrival has been a welcome boost to the flagging Australian tourism sector, which is bracing itself for a slump in international arrivals due to the global economic crisis. But coupled with the recent fall in the Australian dollar there are hopes it could inject some life into Australia's fourth largest source of international tourists.
"We're going to be doing it tough in 2009 so any additional competition on the LA-Sydney route will stimulate the market," said Tourism and Transport Forum executive director Olivia Wirth. Around 370,000 Americans visit Australia each year.
"At the moment we're seeing greater competition in airfares not only in Australia but worldwide," she said.
It is believed Delta's entry could be a byproduct of its merger in October with US rival Northwest Airlines, which made it the largest airline in the world.
As both airlines eliminate overlaps in their respective networks, they now have surplus aircraft to put on new routes, such as to Sydney.
Delta's entry could also thwart Singapore Airlines' hopes of ever gaining permission to fly the route. The Asian carrier has been attempting to gain entry on the route since 1996. Its appeals were knocked back by the Howard Government in 2007, when Virgin Blue signalled its intention to fly to LA. Early this month, Transport Minister Anthony Albanese said he would continue to block Singapore Air from the route despite Australia having a free trade agreement with the South East Asian nation.
A Singapore Airlines commissioned economic survey in 2005 claimed the lack of competition on the LA route was costing Australia $126 million in lost tourism revenue each year. The Econtech report claimed the entry of just one daily service by a new competitor - against Qantas and United - would bring 48,000 extra US tourists to Australia annually. The report also found that airfares on the LA route were substantially higher than those on the highly competitive Sydney-London route, where more than 30 airlines compete.
The study claimed economy fares per kilometre on the Los Angeles route were 17 per cent more expensive than for flights to London. The report said the fare per kilometre to Los Angeles (12,000 kilometres from Sydney) was 8.9c compared with 7.6c for London (20,000 kilometres from Sydney).
Qantas declined to comment on Delta's entry and is yet to announce any new seat sales to LA.
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