US carrier Delta Air Lines has loaded Los Angeles-Sydney fares into travel agent distribution systems, signalling an intention to take on Qantas and United Airlines on the controversial non-stop trans-Pacific route.
Indications today were that the Atlanta-based airline, which recently closed a deal with North-West to become the world’s biggest carrier by traffic, will fly overnight Boeing 777-200LR services between the cities from July 1.
The move would pose a major competitive challenge to the incumbents and takes pressure off the Australian Government to allow Singapore Airlines on the route.
Delta has not made an announcement but a new open skies deal with the US means there are no regulatory impediments to it beginning what appear to be daily services.
It will be the first US carrier to start services to Australia since Hawaiian Airlines began services from Honolulu in 2004and the first to take on non-stop services since United .
The cheapest fares on the system was $US1189 from Los Angeles to Sydney, according to one source, and the most expensive topped $US12,000.
The move will bring to the route for the first time a third major airline alliance, Skyteam. Skyteam, which also includes European juggernaut Air France-KLM, is the major competitor for oneworld, to which Qantas belongs, and the Star Alliance, which includes United.
The extensive range of the 777-200LR opens up new city-pair opportunities between the markets, including Delta’s base in Atlanta, and could be bad news for Virgin Group’s fledgling airline, V Australia, which is starting services to LA from Brisbane and Sydney early next year.
Virgin this week fired the first shot in a potential trans-Pacific airfare war by significantly undercutting other carriers with $1199 tickets to Los Angeles. It plans to launch its first flights on February 27.
Qantas chief executive Alan Joyce said last night he was unaware of Delta plans to enter the market but he was confident Qantas could compete against any new competition.
By: steve rowell - 5th January 2009 at 06:15
Thanks Steve.
Where are you getting this stuff from. It sounds like a news article but you are posting it as if you wrote it yourself.
Sorry Lad just an oversight…can’t remember but i think i read it in USA today
By: Ship 741 - 4th January 2009 at 20:34
Thanks Steve.
Where are you getting this stuff from. It sounds like a news article but you are posting it as if you wrote it yourself.
By: steve rowell - 2nd January 2009 at 06:28
The arrival of Delta Air Lines on the Australia-US route is expected to reduce Qantas’ share of the trans-Pacific market while making V Australia’s road to profitability longer.
The decision by the world’s largest airline to begin daily flights between Sydney and Los Angeles in July will increase passenger seats on the route every week by almost a quarter, or 4900, to 25,000, just as the global economic slowdown severely dents airlines’ profitability.
Virgin Blue’s long-haul carrier, V Australia, has already had to delay its launch by three months and the prospect of having to compete against Delta, Qantas and United Airlines on the Sydney-LA route only makes its task harder.
Macquarie Equities has previously said it could take V Australia as long as two years to break even. It believes the entry of Delta could push this out even further.
The fledging Australian carrier’s start-up costs already stand at about $70 million.
“The presence of two US carriers on the route will make it even more challenging for Virgin Blue to generate inbound sales, with already significant obstacles to overcome,” the broker said.
The biggest threat to Qantas is Delta’s ability to attract US customers because of the latter’s extensive network coverage in the US. The trans-Pacific route provides about 10 per cent of Qantas’ total passenger revenue.
Macquarie said Delta’s entry was “more than likely” to reduce Qantas’ share of inbound passenger traffic, diminishing part of the natural hedge Qantas has had against the fall in the value of the Australian dollar against other currencies.
Qantas’ load factors on the US route fell to 78 per cent in September, down from almost 83 per cent a year earlier, and are expected to drop further due to the deteriorating global economy. Macquarie calculates that V Australia will have load factors of just 60 per cent between February and June.
“Yields will inevitably come under pressure as carriers compete to gain or retain market share. The major concern for all these carriers will be ensuring adequate load factors and yields in a low-demand environment,” Macquarie said.
Qantas boasted load factors of almost 83 per cent on flights from Australia to LA and Honolulu in the year to June, while United had loads of 78 per cent in the same period.
“We would typically expect a double-digit fall in capacity given the weak trading conditions likely to be experienced in the next 12 months,” Macquarie said. “However, we are instead faced with a 24 per cent increase as a result of V Australia and Delta entering the market.”
The broker said the competition on the LA route had some similarities with a surge in flights between Australia and New Zealand between 2003 and 2005 when Air New Zealand and Qantas increased capacity by about 17 per cent.
Then, the airlines’ passenger loads fell from 70 per cent to 65 per cent within two years because of a lack of demand.
Air NZ’s yields on the route subsequently fell 21 per cent over the period.
“It would not be surprising to see a similar outcome on the US route,” Macquarie said.
By: Ship 741 - 20th December 2008 at 20:01
Actually I think they are gonna use ER’s. The great circle distance ATL-PVG and ATL-DXB are both slightly longer than LAX-SYD. If the SYD service had been from ATL it would have been LR’s. They are currently operating 8 ER’s and 2 LR’s with 5 more LR’s coming prior to summer and several destinations or more frequencies for existing destinations are rumored. There have been many posts regarding this topic on other message boards, and lots of arguments both ways, of course winds and routing issues enter into the discussion also.
I wonder how many connecting pax DL was delivering to Qantas every day in LAX? They will now keep those pax as a basis/foundation for the new service.
Brave words by airline executives notwithstanding, another competitor can’t be welcome news for existing operators.
I’m wondering what makes this routing “controversial.”
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December 20, 2008 at 2:41 am