The world's largest airline has thrown down the challenge to Qantas and others by offering return trans-Pacific flights from $777.
US airline Delta announced the fare, which does not include taxes, on Monday ahead of its expected July launch on the Sydney-Los Angeles route, Travel Weekly reported. Taxes would add around $300 to the total fare.
Delta will face fierce competition from Qantas and United, along with start-up V Australia.
The airline is also offering customers the chance to fly beyond LA for an extra $200.
Destinations available under the deal include Atlanta, Boise, Detroit, Indianapolis, New York, Orlando, Memphis, New Orleans, Seattle, Salt Lake City and Cincinnati.
The fresh eruption in the price war comes amidst gloomy times for aviation.
New figures from the American Express Asia Pacific Business Travel Monitor show airlines are cutting prices in a bid to beat the global financial crisis.
The report found Australian published fares were down three per cent in the fourth quarter of 2008.
"Airfares to the US recorded the biggest drop at five per cent compared to third quarter figures," the monitor said.
Jonas Borglin, a spokesman for American Express Business Travel, Japan, Asia Pacific and Australia said the impact of the crisis was clear.
"During the first half of 2008 the economy was strong and airlines responded with airfare increases across all classes and destinations," Mr Borglin said in a statement.
"The economic crisis forced airlines to reassess their pricing strategies in order to continue to attract passengers.