web Musings of The Global Traveller

Friday, February 15, 2008

Australia-US open skies agreement

A nice win for Qantas and more of the same for the travelling public with the announcement that a new Open Skies Agreement has been signed (source SMH).

Only Australian and US airlines benefit from the agreement.

Virgin Blue, through subsidiary V Australia (yet to fly) gains the right to fly more than 4 flights a week in their first year of operation. But with few aircraft and limited expansion possibilities the impact on fares is expected to be low.

Qantas has had its cap on market share on the route lifted. So it can freely add capacity where before it was constrained by the number of flights United and Hawaiian flew between Australia and USA. However, with the route such a cash cow for Qantas I don't expect any significant increase in the number of their flights. They will want to protect yields on their existing flights.

US-based airlines in theory have more rights. However the 2 existing airlines (United and Hawaiian) have no aircraft available to add more flights and a few other airlines still have rights from when they previously flew the route. It is hard to see any genuine new entrants from USA in the short term at least.

Meanwhile, Singapore Airlines and Emirates, who both have been lobbying for years to be allowed to fly between Australia and USA have been shut out once again.

I can't see the notoriously high fares on these routes coming down much any time soon. Instead the agreement has given both Qantas and Virgin Blue the license to make even more money.


Steamboat Lion said...

" Instead the agreement has given both Qantas and Virgin Blue the license to make even more money."

How much money? A couple of months out business class from LA to Sydney is 19,000 dollars. For the same dates business class from Sydney to London, nearly twice the distance, is about 9,000 dollars.

The only difference is the competition that Qantas have on the latter route. As an Aussie I really resent my government allowing me to be shafted like this to protect a few Qantas shareholders and employees.

Seth said...

I don't think that the government is selling out, though it'd be nice to have true Open Skies instead of this "Ajar Skies" game.

The real problem is that this was negotiated theoretically as a bilateral, but it actually does very, very, very little to benefit the US carriers right now, as they're all pretty much in shambles thanks to a weak dollar and high fuel prices, plus none of them have any spare aircraft lying around to run these flights (which require ~1.5 planes to do a daily run.

As for the existing US-based carriers' rights, most of those are ex-HNL, I believe, so they don't help quite as much.