Virgin Blue

Virgin Blue, the Australian low-cost airline, said it would start services between Australia and the US this year after the two countries agreed an "open skies" policy that breaks the stranglehold on the Pacific route held by Qantas and UAL's United Airlines.

Analysts believe the Pacific route is one of the most profitable in the global airline industry.

Brett Godfrey, Virgin Blue chief executive, said the agreement between Canberra and Washington would usher in a new era of competition after close to 20 years of "restrictive bilaterals".

However, he said he did not expect US carriers to take-up the opportunity to begin flying to Australia immediately. "The US currency is weak [compared to the Australian dollar] and I expect US carriers to undergo a period of consolidation rather than expansion."

Qantas said it had supported the Australian government's efforts to fully liberalise air services. "This had been largely achieved," said Geoff Dixon, Qantas chief executive.

Under current arrangements, American carriers are able to set up local operations in Australia, although Australian carriers cannot do the same in the US.

However, Mr Dixon said the agreement would provide new opportunities for growth and competition.

"It will assist the further development of Australia's aviation industry, as well as help increase trade and tourism with a major economic partner," Mr Dixon said.

Qantas is operating at its highest frequency of 48 services per week on the Pacific route and plans to increase that to 51 next month. United has 14 services and Virgin plans to have an initial 10.

Virgin Blue last year won approval from Australia's aviation authorities to operate non-stop services between Australia and the US.

V Australia, as Virgin Blue's long-haul carrier will be known, will initially fly between Australia's east coast and the US west coast.

Singapore Airlines and Emirates are also keen to fly the Pacific route. However, Friday's agreement only covers airlines from both home markets.