Airfares rising: flights to Los Angeles up 20 per cent

AIRLINES are banking on improved returns from flights between Australia and the US after several years of substantial losses caused by fare discounting.

While the arrival of Virgin offshoot V Australia and Delta Air Lines on the route in 2009 ushered in a period of super-cheap prices, it turned what had been a highly profitable service for the two incumbents, Qantas and United Airlines, into a loss-maker. But anecdotal evidence from Flight Centre shows fares for trips to Los Angeles and New York have become more expensive in the past year. Economy return tickets to LA sold last month were up about 20 per cent to $1150 from a year ago, while those to New York increased about 10 per cent to $1360.

Flight Centre spokesman Haydn Long said US fares had returned to a more sustainable level for airlines but were still cheaper than before the global financial crisis in late 2008.

Despite rising fares, the latest government figures show consumers are still eager to fly between Australia and the US. Qantas' seat use on the route in September averaged 91 per cent, Virgin's was 90 per cent, Delta's 92 per cent and United's 87 per cent.

While Qantas is bleeding money on flights to Europe, the trans-Pacific route has become its best international performer, operating at about break even. The airline recently told investors the route was "structurally sound" because its rivals had similar cost bases.

Qantas has dubbed routes to Europe, China and south-east Asia "structurally challenged" because of intense competition from Middle Eastern and Asian airlines with lower operating costs. It has sparked speculation that Qantas might increase capacity on the trans-Pacific route, while scaling back further on flights to Europe. But CBA Equities aviation analyst Matt Crowe said he would be surprised if that happened, given the broader economic conditions.

"It looks like there is a fair bit of capacity already [on the route]," he said.

Qantas said it was watching developments in Europe but had made no decisions about changes to capacity. Qantas operates A380s on the LA route - helping to increase its appeal to passengers - while its Boeing 747-400 jumbos fly to Dallas.

To ease its exposure to Europe, Qantas will reduce flights on the so-called "kangaroo" route from five to three a day from April. The flights it drops from Hong Kong and Bangkok to London will be filled by joint venture partner British Airways. Virgin Australia is bedding down its alliance with Delta on the US route after regulators in America gave them antitrust immunity in May.