Australia and the United States have reached a bilateral “open skies” aviation agreement, the countries announced on Friday, clearing the way for increased competition on some of the world’s most lucrative and protected long-haul routes.
The bilateral agreement abolishes all restrictions on US and Australian air services for carriers of both countries, ending a virtual duopoly held by Qantas and UAL Corp’s United Airlines. Qantas controls 75 per cent of the market share on Australia-US routes, from which it derives around 15 per cent of its net profit.
The deal will allow Australian carrier Virgin Blue Holdings Ltd. to begin flights to the United States by the end of the year – but leaves Singapore Airlines Ltd, which has long coveted US-Australia routes, still without access.
It would also “provide certainty” for Australia’s Qantas Airways Ltd. and its budget offshoot Jetstar, allowing them to widen the network of American cities they currently serve, Australian Transport Minister Anthony Albanese said in a statement.
“Airlines from both countries will be allowed to select routes and destinations based on consumer demand, without limitations on the number of US or Australian carriers that can fly between the two countries or the number of flights they can operate,” a US Department of Transport statement said.
“The agreement also removes restrictions on capacity and pricing, and provides opportunities for cooperative marketing arrangements, including code-sharing, between US and Australian carriers,” it said.
The agreement only applies to American and Australian carriers.
The Australian government last year denied Singapore Airlines’ request to start services in the corridor on the grounds that opening up such routes to the Asian carrier would bring only minor tourism benefits and could hurt the economy. The carrier had hoped a change in government in Australia last November would see a softening of opposition to its ambitions.
Singapore Airlines said that hope had been squelched by Friday’s agreement.
“The agreement to liberalize for Australian and American carriers on the US route is long overdue,” Stephen Forshaw, Singapore Airlines’ vice president for public affairs said in a statement. “But it is only half a step.”
The company repeated its accusation that the Australian government was unfairly protecting Qantas from competition by denying Singapore Airlines access to the trans-Pacific routes.
At a news conference, Albanese said the government made “no apologies for making sure that Australian interests have been put first in this agreement.”
Qantas immediately announced it would increase its flights to the US to 51 a week from March from 48 a week now, and Chief Executive Geoff Dixon urged the government to pursue similar agreements with other countries.
“Further liberalization of air services arrangements with a number of countries if needed if Australian carriers are to grow operations and match opportunities available to foreign competitors,” Dixon said in a statement.
The agreement comes after three days of negotiations in Washington and will take effect once formal approval from the US and Australian governments is granted.
Virgin Blue, Australia’s second-largest airline by revenue, wants to fly 10 Boeing 777-300ER services a week to the west coast of the US through its new international carrier, V Australia.
The airline last year got approval from the Australian government to add trans-Pacific routes, but an agreement with the US was still needed.
Virgin Blue Chief Executive Brett Godfrey said the agreement was a “great outcome” for Australian travelers and would begin a new era of competition for air services between the countries.
“We’ll certainly see some better pricing than we’ve seen,” Godfrey told Sky News Business television. “But in terms of a price war ... I wouldn’t quite see that.”
Shares in Qantas fell as investors mulled the increased competition threat but recovered some ground to finish 2.53 per cent lower at 4.63 Australian dollars. Virgin Blue surged 2.76 per cent to A$1.49. (AP)
US and Australia reach `open skies’ agreement