Will American Airlines’ Flights To Sydney & Auckland Yield Lower Prices?

In the space of a few months American Airlines has gone from having zero presence in the South Pacific to having two prestigious routes to Australia and New Zealand.

On 17 December, American Airlines will commence a daily service between Los Angeles and Sydney, giving American its first Australia service in nearly 24 years. And, as we found out just last week, in June 2016 American Airlines will commence service between Los Angeles and Auckland breaking Air New Zealand’s four-year monopoly on the route.

American’s re-entry into the Australian market (this will be the first time the airline has flown to Australia since 1992) and its new route to New Zealand are both down to a strengthened joint venture agreement with Qantas and, for once, an airline JV may work out well for consumers.

As far as I’m concerned joint ventures are never entered into with the consumer in mind – they’re there to make more money for the airlines involved – and this one is no different. But consumers could win out with this one.

Via the American/Qantas JV, the airlines have agreed a deal whereby American Airlines replaces Qantas on one of its daily flights between Los Angeles and Sydney and that in turn allows Qantas to repurpose their aircraft so as to recommence service between San francisco and Sydney. It’s an airline merry-go-round.

As things stand this is the approximate number of passengers Qantas can serve between the West Coast and Australia (capacity figures from Seat Guru):

That gives a total weekly capacity of approximately 10,500 passengers in any given direction.

Once American Airlines commences service to Sydney and Qantas has finished re-jigging its aircraft (by April 2016) this should be the new situation:

The new weekly capacity on the West Coast – Australia routes should rise to approximately 12,000 passengers in any given direction.

That’s an increase of 14% in Qantas/American’s capacity from the West Coast to Australia.

The increase was set to be almost 25% but, today, Qantas announced that its 747 LAX-SYD route will be discontinued  from April 2016.

I’d be the first to admit that Seat Guru isn’t always the most reliable of sources but, when we’re dealing with numbers like these, I don’t expect them to be too far out – certainly not to any significant degree.With Delta already offering a service between Los Angeles and Sydney and United offering a service between San Francisco and Sydney, this increase in capacity by American and Qantas will surely put pressure on ticket prices. Maybe not straight away but I can’t see it being too long before one of the protagonists blinks and we get some nice fares on a set of routes that have, traditionally, been some of the more expensive around.

American Airlines will commence flights between Los Angeles and Auckland from June 2016

If you don’t think that’s likely this may give you pause for thought:

American Airlines announced its new route to New Zealand on Tuesday 10 November and on Wednesday 11 November the New Zealand Herald was reporting the following:

Dreams of an air fare war between New Zealand the United States have been realised, with Air NZ today slashing its airfares to Los Angeles just as American Airlines confirmed it will start flying here in June.

Air NZ has cut grabaseat fares to Los Angeles to $499 from around $785. American Airlines chief executive Doug Parker said it hadn’t set its fares yet but said it would be competitive.

Air New Zealand CEO Christopher Luxon said increased competition on the route was not unexpected.

“We’re ready for it and we look forward to it.”

Competition was a good thing and more direct flights would grow traffic and the whole New Zealand tourism market, he said.

The key issue was the sustainability and stability of new routes and services.

“Air New Zealand is here for the long term,” he said

That last line was probably a dig at American Airlines whose last venture down-under lasted less than 2 years (between 1990 and 1992) but, nevertheless, Air New Zealand is clearly getting ready for a battle.

I realize that the dynamics of the Australian and New Zealand markets aren’t necessarily the same but there are parallels.  If the addition of just one competitor into a market so overwhelmingly dominated by Air New Zealand can see fares take a dive then I’m convinced that American’s entry into the Australian market can have a similar effect. Let hope sooner rather than later!

Featured image courtesy of Qantas.