Australians' appetite for travel to the United States might dip slightly due to the weak dollar, but they are more likely to cut spending on hotels or tourist attractions than decide against flying across the Pacific, Qantas chief executive Alan Joyce says.
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With the prospect of a fare war looming on trans-Pacific routes once Qantas and American Airlines boost capacity by 9 per cent next month, Mr Joyce said the weaker dollar had resulted in increasing numbers of American tourists here, while demand from Australians for flights to the US was "still robust".
"What we think is happening is that [Australians] are just spending less on … the hotels but still making the trips," he said on Friday. "We think it might taper off a little bit but it won't be significant."
On the flipside, the fall in the value of the dollar has made Australia a much cheaper destination for Americans.
"This is a boom time for US tourism into Australia," Mr Joyce said. "Last year we saw a 9 per cent growth of US tourists – over 544,000 tourists spending $3 billion here. There is a huge opportunity in this inbound tourism … and particularly from the US."
The Australian dollar has fallen 16 per cent against the greenback since the start of the year to about 71.3¢.
Mr Joyce said the "sweet spot" for Qantas was a dollar trading at about 70¢, making Australia a cheaper destination but not pushing the airline's costs too high, given it buys fuel and aircraft in US dollars.
"You don't want it too low, but being at the stage [where] it makes Australia a very, very competitive place to come to, whereas before it was a very expensive place to come," he said.
Pressure on incumbents
As part of an expansion of its alliance with Qantas, American Airlines will start daily flights to Sydney on December 19 using Boeing 777-300ER aircraft – the first time the world's largest airline has made regular passenger services to Australia since the 1990s. Back then, it was flying DC10s to Australia from Honolulu.
The expansion of the alliance will enable Qantas to redeploy its Boeing 747-400s to the Sydney-San Francisco route next month, ending the monopoly that United Airlines holds on the run.
American Airlines' entry to the market will pile pressure on incumbents Virgin Australia, Delta Air Lines, Hawaiian Airlines and United.
"You will see the trans-Pacific have significant growth and continue to have low air fares," Mr Joyce said at a briefing with American Airlines chief executive Doug Parker at Sydney Airport.
He also emphasised that Qantas' purchase of new Boeing 787s for delivery over the next few years will allow it to further expand flights to the US, citing the possibility of Melbourne-Dallas and Sydney-Chicago routes.
In July, the Australian competition regulator gave interim approval to the airlines expanding their alliance on Pacific routes despite opposition from Air New Zealand, because it deemed it likely to lead to additional capacity on routes from Sydney to San Francisco and Los Angeles.
While the airlines still need a final nod from regulators in the US and Australia, their expanded alliance gained approval in New Zealand on Wednesday.
Earlier this week, American Airlines unveiled plans for flights between Los Angeles and Auckland from next June using Boeing 787-8 Dreamliner aircraft, which will end Air New Zealand's monopoly on the route and increase capacity by 16 per cent. Qantas flew between Auckland and LA until 2012.
Under its strategy to target the "Pacific rim", Air New Zealand confirmed plans on Friday for seasonal flights between Auckland and Vietnam's largest city, Ho Chi Minh. The airline will also begin flights to Argentina next month.
In other industry developments, Virgin named acting chief financial officer Geoff Smith as the permanent replacement for Sankar Narayan.
