Qantas optimistic on trade deal

Qantas optimistic on trade deal

Australian Prime Minister John Howard met with President Bush this month to discuss the Iraq war. But his real mission was to sell Congress on approving the U.S.-Australia Free Trade Agreement, which would abolish tariffs, limits and other barriers on a wide range of high-value, time-sensitive goods. Qantas Airways is cheering him on.

The Australian carrier is betting heavily the accord will be blessed by lawmakers in both countries and go into effect Jan. 1, triggering a windfall of southbound cargo from U.S. exporters willing to pay $2 a kilo for nonstop service. That fat rate is more than double what airlines can command today on fiercely competitive routes to Asia. "Australia is the last of the good airfreight markets," said Bruce McCaffrey, head of Qantas' cargo for the Americas.

With 35 percent of the U.S.-Australia market, Qantas is ramping up to capitalize on the trade agreement and other growth. On June 16, it launches the only U.S.-to-Brisbane service, with three 747-400 ER flights weekly from Los Angeles, where Qantas already operates five flights daily.

The U.S.-Australia trade agreement would cover agriculture and perishables, telecommunications, pharmaceuticals, medical equipment, electronics, intellectual property and manufacturing. Many of the goods covered by the agreement are well-suited to air shipment.

Manufactured goods account for 93 percent of U.S. exports to Australia. The new agreement would give the U.S. an immediate tariff advantage over European and Asian exporters. Meanwhile, the U.S. dollar, battered in Europe, is holding firm at 30 percent stronger than the Australian dollar and the U.S. has a $9 billion trade surplus with Australia. The new trade agreement would end duties on 97 manufactured goods that Australia sells to the U.S.

Despite the impending elimination of tariffs on computer and electronics gear, Qantas has no plans to add San Francisco as a gateway city. "Airfreight out of SFO is not as significant as the days when Silicon Valley was strong," McCaffrey said. Rival Air New Zealand launches daily 747 service this month from San Francisco and will get interline cargo feed from its fellow Star Alliance member United Airlines.

Chicago isn't on the Qantas radar screen for passenger service either. "Before 9/11, we were planning to add Chicago, but now it's on permanent hold," McCaffrey said. However, Midwest shippers can book space on a code-shared Polar Air Cargo 747-400 that flies from Sydney to Singapore, Shanghai and Chicago via Anchorage.

A major Qantas customer, global forwarder Panalpina, said the U.S.-Australia trade accord is good for its shippers - manufacturers of such time-critical heavy freight as automotive, aircraft, aerospace parts and construction and mining equipment. "It will affect U.S. exporters very positively, and Panalpina is well-positioned because we're engaged in that manufacturing sector," said Doug Brittin, vice president of marketing-North America at Panalpina.

Red Alexander, director of promotional air linehaul at DHL, which also uses Qantas, said the effect of the trade deal is "undefined at this point until we see how the final law affects customs clearance." DHL uses Qantas for its high-priority shipments and at rates he says range from $2.50 to $5 a kilo.

Some core commodities in the U.S.-Australia trade already are strong and won't necessarily be increased by liberalized trade agreements. Qantas feeds Australians' appetite for fresh U.S.-grown grapes, cherries, strawberries and asparagus. McCaffrey said volumes of perishables are up 5 percent this year.

A new market for Qantas is Hollywood Down Under, show-business slang for the rush to film more motion pictures and television programs in Australia and New Zealand. New film studios are planned for Australia, and more music groups are performing and recording there.