A new airline started by flamboyant British billionaire Richard Branson inaugurated service between Los Angeles and Australia on Friday, the latest volley in a transpacific fare war that has already cut the price of a round-trip ticket by half.
The first flight of V Australia, carrying about 300 passengers from Sydney, landed at Los Angeles International Airport on Friday morning, greeted on the tarmac by firetrucks with water guns and then at the gate by Disney characters Mickey Mouse and Goofy.
But the festive atmosphere -- a Branson trademark wherever he goes -- masked a troubling global air travel slump with no end in sight.
The falloff in demand has meant lower fares, but with airlines struggling to fill their planes, a prolonged downturn could ground weaker carriers and leave travelers with fewer choices and eventually a return to higher fares, analysts and industry officials said.
"The industry is in a global crisis and we have not yet seen the bottom," said Giovanni Bisignani, chief executive of the International Air Transport Assn.
The airline trade group said Friday that international airline passenger traffic fell 5.6% in January, the fifth consecutive monthly drop. "Alarm bells are ringing everywhere," Bisignani said.
But Branson, in an interview after a welcome ceremony at LAX, said he was confident that his new airline could weather the economic turbulence.
"There are plenty of people who've still got to fly, and the market across the Pacific is still very big," Branson said. "I wouldn't necessarily say every airline in the Pacific will survive, but if you make sure you've got the best carrier flying, the chances are you'll do well."
The new airline can "afford to be price competitive," Branson said, because it flies newer planes that are more fuel-efficient and less expensive to maintain than those flown by competitors. The planes also have amenities that include two bars, a restroom for women only and mood lighting.
A consummate salesman, Branson claimed that the business-class seats on V Australia planes are also wider. "When you're trying to sleep, size does matter," he said.
In addition to more choices in traveling to Australia -- for years only two airlines, Qantas Airways and United Airlines, offered nonstop flights -- V Australia's entry has led to a dramatic drop in fares. Nonstop round-trip economy tickets that averaged about $1,500 to $2,000 last year are now below $1,000, and on some travel days they have dropped to as low as $700.
Qantas has responded by matching the low fares and by inaugurating the double-decked Airbus A380, the world's largest and perhaps the quietest passenger jet, on its LAX route.
Thanks to a landmark "open skies" agreement between the U.S. and Australia last year, another U.S. carrier -- Delta Air Lines -- is expected to enter the fray, a move that could lead to even more airfare deals this summer.
"It's time to put a little shrimp on the barbie," said Tom Parsons, editor of online travel guide Bestfares.com.
With the start of V Australia service, fares have dropped sharply for travelers across the United States, he said. A round-trip ticket from New York, with a connection at LAX, has dropped to about $900, with all fees and taxes included, compared with $2,200 last year.
"It's been amazing to watch," Parsons said. "A flight to Australia used to be one of most expensive. Now you can fly there and still have spending money."