Airline dogfight over lucrative Pacific route

July 27, 2009
Delta planes at John F. Kennedy International Airport in New York

Major airlines are fighting the biggest war in 15 years over the lucrative Pacific route linking Australia and the US, experts say.

Carriers are slashing prices and offering special deals after US giant Delta and Virgin’s V-Australia entered the market this year – just as the downturn grounds swathes of passengers.

“It’s not a pretty place right now,” said Peter Harbison, of the Center for Asia-Pacific Aviation research group.

Analysts are tipping at least one airline to pull out within months after the new players muscled in on a route long dominated by Australia’s Qantas and US carrier United Airlines.

Fares are touching all-time lows, less than half of those paid a year ago, on a route that has not been so competitive since Continental and Northwest pulled out in the early 1990s.

“I think [fares are] probably about as low as they’ve ever been. It’s not just the competition and the arrival on the route of V-Australia and Delta,” said Tom Ballantyne, chief correspondent for Orient Aviation magazine.

“The current recession is hitting the airline industry very hard, particularly the high-yielding business-class traffic.”

The entry of Delta, the world’s biggest airline, this month sparked a furious round of discounting on what is one of the globe’s most profitable routes.

Some fares have dropped to just US$530 return and carriers are offering extra incentives, such as VAustralia’s free limo pick-up for business passengers.

Australian flag-carrier Qantas is selling business-class seats two-for-one and has taken the “unprecedented” step of letting children fly free.

“This is the first sale of its kind for many, many years,” a Qantas spokeswoman said.

Analysts are convinced the bloodletting will kill off one player, possibly as early as October, with V-Australia tipped as the most likely casualty.

“It’s unlikely that all of the carriers will continue to serve on the route. There are simply too many seats on the route and you can’t fill them,” Ballantyne said.

“Delta is a pretty big airline, they’re not going to start and then leave. But V-Australia may decide this is not worth the effort.”

However, V’s operator Virgin Blue has announced a joint venture with Delta which is currently awaiting regulator approval.

America’s United has underlined its commitment to a route it has served for 24 years, while a pull-out by Qantas, which accounts for half the market, is unthinkable.

“We’ve invested heavily in that route and we’ve no plans to do otherwise,” the Qantas spokeswoman said.

Until one airline blinks, passengers will be able to enjoy cheap seats on the 14-hour journey to and from Los Angeles.

“It’s fantastic for consumers – but very bad for airlines,” Ballantyne said.

Source: AFP

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