Airfare wars take off!
Posted on: April 24th, 2008 by Bobby JonesAn air fare war over the Trans pacific route is beginning. Only a few airlines operate on that route and competition between them is fierce. Qantas was the dominant airline on the Sydney-to-Los Angeles route until V Australia announced it would begin daily flights from December the 15th this year. Virgin stated at the time of V Australia’s launch that it would offer flights to LA for 16% less than Qantas and thus beginning the airfare war. For more information on V Australia’s daily Trans Pacific flights see http://www.vaustralia.com.au/
Qantas has responded to V Australia’s cheap ticket prices by offering all inclusive return fares to San Francisco and Los Angeles for $1899. This offer will run between November 1 and December 9. Qantas is not the only airline to offer tickets from Australia to America for under $1900; United Airlines has also dropped the price of its Trans Pacific flights. To see more of Qantas offers see their website on http://www.qantas.com.au/regions/dyn/home/qualifier-region-au These cheap airfare prices have been introduced just 2 weeks after V Australia’s announcement of cheap daily flights and looks to be an emerging price war.
Brent Mitchell, a Shaw Stock broking analyst, said that he expected Qantas’ low airfares was likely to be promotional in order to ensure they keep their current passengers and full loads on their flights. Mr Mitchell continued in saying that he anticipates Qantas will continue to have significant demand for their service and that Qantas’ profitability will not be impacted by lower fares.
A spokesman for Virgin Blue stated that they predicted Qantas would respond to their low cost fares by introducing new fares of their own. Qantas failed to comment on whether they planned to decrease their fares any further but stated that they monitor all their routes to ensure they remain competitive within the industry.
It seems the price war has begun, with 3 airlines operating on the Trans Pacific route lowering their fares to date. With fuel prices reaching an all time high at $US135 a barrel, analysts therefore do not expect airlines to drop their fares much further.
P Clarerbough
Qantas are quietly delighted with the extra competition but have no fear as they are about to introduce significantly more seats with their new A380 aircraft late this year. They will then be in a strong position to significantly discount airfares to starve the competition of business. Remember, is it hard to break into the Trans-Pacific monopoly, or in this case duopoly, with United Airlines. If Singapore Airlines was granted rights to fly the route, Qantas would and should be scared. They have very deep pockets and could stand up and survive a ticket price war to enter the market. I hope the government will approve Singapore Airlines to fly this route and shake up the strong hold Qantas has to force price reductions and improvements in service delivery.