Saturday, February 16, 2008

Open skies?

Australian newspapers are reporting on plans by Virgin Blue subsidiary V Australia to start trans-pacific flights in competition with Qantas as a result of Australia and the US signing an "Open Skies" agreement.

Unfortunately all this agreement does is allow US and Australian carriers to compete on this route without capacity controls. It doesn't allow for open anything.

What's the effect? Continued daylight robbery on the part of Qantas who compete only with United* for direct flights.

Let me demonstrate. Let's say I wanted to fly business class from Los Angeles to Sydney on May 20 returning June 17 (which I actually do, to attend my cousin's wedding and take care of some other stuff, not to mention catch a couple of Brisbane Lions games). It's going to cost me $US17,778!

Now let's imagine I want to make this trip from London to Sydney on the same dates, also in business class. Now before you see the price remember that this trip is about 75% longer. What's it going to cost me? £3,376 or $US6,621. That's about a fifth of the cost per mile.

The only difference is that excellent airlines like Singapore Airlines and Emirates compete with Qantas between Australia and Europe. Over recent year's they've lobbied the Australian government unsuccessfully to enter the trans-pacific route. The government's justification for keeping them out is that it's somehow good for Australian tourism and jobs. As far as I'm concerned the only jobs this policy is creating are for Air New Zealand.

So when the Qantas CEO Geoff Dixon says he welcomes the competition, what he really means is he's glad he can go on screwing trans-pacific business travellers and extracting excess profits thanks to this artificial market shortage created by the "wisdom" of government regulation. All I can say to Mr Dixon is "you're absolutely full of it mate".

* The world's second worst airline. Exceeded in their hopelessness only by Northwest.

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