Fed: Trans-Pacific price war set to erupt

AAP General News (Australia)
02-15-2008
Fed: Trans-Pacific price war set to erupt

By Peter Veness and Kaaren Morrissey

CANBERRA, Feb 15 AAP - Travellers will be the winners from an aviation price war that
is almost certain to erupt on the lucrative route between Australia and the United States.

The federal government today signed a historic deal with the US that will "open" the
skies between the two nations - allowing airlines from both countries to fly across the
Pacific as often as they want.

New US and Australian airlines will also be allowed to enter the route which has been
dominated for decades by Qantas and United Airlines.

But the route is still closed to airlines from other nations.

Transport Minister Anthony Albanese tantalised tourists and business with the prospect
of cheaper fares.

"This agreement will be good for competition and could lead to lower airfares," Mr
Albanese told reporters in Sydney.

Flight Centre managing director Graham Turner said travellers would be the main beneficiaries.

"History has shown that competition in the aviation sector delivers real benefits to
travellers and the tourism industry in general," Mr Turner said.

"This has been clearly illustrated in the Australian domestic market, with travellers
enjoying an unprecedented wave of discounting following the arrival of Virgin Blue, Jetstar
and Tiger.

Qantas chief Geoff Dixon welcomed the deal, saying it offered new opportunities for
the national carrier. The market was less enthusiastic with Qantas shares falling more
than two per cent, closing at $4.63, down 12 cents.

In contrast Virgin Blue shares gained four cents, finishing at $1.49.

"It brings new opportunities for growth and competition," Mr Dixon said.

"Importantly, it will assist the further development of Australia's aviation industry,
as well as help increase trade and tourism with a major economic partner," Mr Dixon said.

Mr Dixon announced Qantas would increase flights between the US and Australia from
48 to 51 per week as of next month.

Virgin Blue chief executive Brett Godfrey says the agreement will bring in much needed
competition between airlines.

"It will be a huge win, not just for Virgin Blue, but for Australian jobs, it will
be huge win for the Australian travelling public and it will be a huge win for tourism,
particularly those parts that have been hard hit in the last few months in Australia,"

he said.

Virgin Blue had been asking for 10 services a week to the United States to make the
route viable, he said.

While competition will increase, the deal does nothing to appease the complaints of
giant Asian carrier Singapore Airlines.

Mr Albanese said the government did not plan to grant Singapore's long-held wish to
enter the lucrative Australia-US route.

"We make no apologies for Australian interests being put first in this agreement,"

Mr Albanese said.

"We want to make sure it's Australian carriers."

Singapore spokesman Stephen Forshaw described today's agreement as "half a step" in
the right direction.

"The agreement to liberalise for Australian and American carriers on the US route is
long overdue," he told AAP in a statement.

"But it is only half a step.

"We remain committed to pushing for further liberalisation, but understand this is
more likely at a measured pace. We are patient.

"All over the world, these changes are occurring and consumers are benefiting.

"Australia should be no different."

Mr Albanese said he had met with Mr Dixon and Virgin Blue chief executive Brett Godfrey,
as well as the US ambassador Robert McCallum, to discuss the deal.

The minister admitted Sydney Airport, close to his electorate, would cop most of the new flights.

"There are ongoing discussions with Sydney Airport and today for the first time (it)
indicated that it will place a major development plan for the runway extension safety
areas work, with the federal government," Mr Albanese said.

AAP pv/sb/jl/de

KEYWORD: SKIES NIGHTLEAD

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