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Virgin Blue


Talks spell 'V' for victory for Virgin Blue

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Feb 11, 2008

AUSTRALIA and the US could sign an "open skies" agreement this week that will give Virgin Blue clearance to launch 10 weekly services to the US by the end of this year.

The Government is pushing to get a deal finalised by Friday, with talks between the two governments scheduled to begin in Washington tomorrow.

"The Australian Government is hopeful that [this] week's negotiations in Washington will result in significant liberalisation of air-services arrangements between Australia and the US, while at the same time protecting our national interest," said the Transport Minister, Anthony Albanese.

"Greater access for Australian carriers to the US market will benefit consumers and bring economic benefits."

The talks were originally set up by the Howard government.

Under a new air-services treaty, it is expected that Australian and US carriers wanting to operate direct flights between the two countries would no longer be restricted to operating four flights a week in their first year of service.

This would allow Virgin Blue's new long-haul arm, V Australia, to operate 10 flights a week. The airline is expected to launch daily flights on the lucrative Sydney-Los Angeles route, on which Qantas has a near monopoly.

At present United Airlines is Qantas's only competitor between Australia and the US mainland, which is considered one of the world's least competitive routes. Qantas controls about 80 per cent of capacity on the route.

It is unclear what the US wants out of the talks, but there is some speculation that the removal of the four-flights-a-week cap may be seen as an added incentive for new US carriers to enter the route.

The inability to fly daily services is considered a major handicap, especially if an airline is trying to attract high-paying business-class passengers. American carriers could also seek additional rights to fly to Australia via Asia.

Despite facing competition from V Australia, which will operate a fleet of Boeing 777s, Qantas has expressed support for an open-skies deal.

"Qantas supports the significant liberalisation of the US [route]," said the company's head of government relations, David Hawes.

The airline is not expected to gain too much from the talks, apart from securing permission to add as much capacity as it requires on the Australia-US route, plus more rights to extend its code-share arrangements into more US cities with its partner American Airlines.

However, there are suspicions that Qantas is eager to show its support for an open-skies policy to ensure that its international arch-nemesis, Singapore Airlines, is indefinitely barred from the route. The deal would only be open to US and Australian carriers.

It is also argued that Qantas would prefer to have a fledging carrier such as V Australia as a competitor, rather than Singapore Airlines.

After taking submissions from Virgin Blue, Qantas and various tourism bodies, it is believed Mr Albanese has been persuaded on the argument that opening up air links to more competition stimulates economic activity.

In its submission, the Transport Tourism Forum highlighted the recent European Union-US open-skies deal as an example that Australia should follow.

It is unclear what Mr Albanese makes of Singapore Airlines's plight. It is two years since the Howard government reneged on a promise to give the airline access on the highly lucrative Sydney-Los Angeles route in favour of giving Virgin Blue a chance to launch a carrier on the route.

Any open-skies deal will also continue to bar Air Canada from flying between Toronto and Sydney via Los Angeles.

However, there are suspicions that Qantas is eager to show its support for an open-skies policy to ensure that its international arch-nemesis, Singapore Airlines, is indefinitely barred from the route. The deal would only be open to US and Australian carriers.

It is also argued that Qantas would prefer to have a fledging carrier such as V Australia as a competitor, rather than Singapore Airlines.

After taking submissions from Virgin Blue, Qantas and various tourism bodies, it is believed Mr Albanese has been persuaded on the argument that opening up air links to more competition stimulates economic activity.

In its submission, the Transport Tourism Forum highlighted the recent European Union-US open-skies deal as an example that Australia should follow.

It is unclear what Mr Albanese makes of Singapore Airlines's plight. It is two years since the Howard government reneged on a promise to give the airline access on the highly lucrative Sydney-Los Angeles route in favour of giving Virgin Blue a chance to launch a carrier on the route.

Any open-skies deal will also continue to bar Air Canada from flying between Toronto and Sydney via Los Angeles.

business.smh.com.au

Talks spell 'V' for victory for Virgin Blue
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