Brisbane Airport

Qantas maintains the regional rage against Virgin Australia, contracting Alliance Airlines

Qantas will enhance its domestic competition with Virgin Australia by making new pushes into regional Australia via a short-term partnership with Alliance Airlines, primarily a fly-in, fly-out operator serving the mining and resource sector. Alliance will operate an initial 19 services a week between Brisbane and Emerald with Fokker F100 aircraft, which with 100 seats are of higher capacity than the 74-seat Q400s Qantas normally uses – as well as the 68-seat ATR72 aircraft recently introduced by Virgin Australia, which broke Qantas' near monopoly on the route.

Qantas' regional network is primarily operated by subsidiary QantasLink, which CEO Alan Joyce has termed the “quiet achiever”. But since Virgin Australia's push into the highly profitable regional Australia market in Oct-2011, Qantas has experienced a greater challenge to its dominance. It has already re-deployed 115-seat 717s from the west coast to the east coast and announced new frequent flyer lounges in regional centres. The high yielding regional market is the end-game for Virgin Australia to challenge Qantas more effectively. It does not score the major points in terms of market share, but it does deliver considerably higher average yields.

Australian aviation market shows signs of slowdown just as airlines were enjoying yield premiums

There are now clear signs the Australian aviation market is entering a light slowdown, with carriers adding capacity ahead of demand while airfares decline marginally. This will affect the region's carriers differently and they should all fare better than counterparts elsewhere in the world; notably, the market in Australia is still growing, but not as fast. Most exposed are Qantas mainline and Tiger Airways Australia. The former has been slowly losing some corporate business to Virgin Australia and competes with a higher cost base.

Tiger is suffering from group-wide over-capacity and would not be able to redeploy capacity as readily. Unlike Tiger, Jetstar has a healthy and rapidly growing pan-Asian network that can absorb any surplus capacity and at a higher margin even than in Australia. Virgin Australia is seeing yield growth from its transition to a business carrier, growth that should overcome any weakness in the more leisure-exposed areas of its business.

In selecting Gold Coast over China as its second destination, Scoot again goes with low risk option

New Singapore Airlines (SIA) low-cost long-haul carrier Scoot announced today Gold Coast as its second destination after Sydney and confirmed its intention to launch services in Jun-2012. Scoot has decided to launch with two routes to Australia because the process of securing authorisations for China, which Scoot has said will also be served within its first year, is longer and more unpredictable. Gold Coast was selected over two other Australian airports on Scoot’s short list, Adelaide and Brisbane, because of Gold Coast’s excellent track record of success with LCCs, including Asia’s two existing low-cost long-haul carriers – AirAsia X and Jetstar. Gold Coast is also the largest airport in Australia currently lacking a link with Singapore.   

Gold Coast is the fifth largest international airport in Australia behind Sydney, Melbourne, Brisbane and Perth (see Background information). Among Australia’s top airports it has by far the highest LCC penetration rate. Currently LCCs account for 98% of total capacity (seats) at Gold Coast, including 90% of international capacity and nearly 100% of domestic capacity.

Tiger Australia settles in for medium-term with new director but growth restrictions and lower fares

Tiger Airways Australia is settling in for the medium-term with a re-launched network it has built up, which is now approximately one-third of its Jun-2011 pre-grounding size. The immediate future will see former Virgin Blue executive Andrew David take the reigns from Tony Davis, who is leaving the company.

Tiger is also lowering its lead-in fares to pre-grounding levels, but no headline fares of AUD15 inclusive or zero (plus taxes) have been offered yet, and may not be as long as Tiger faces no price undercutting and seeks to build network volume with requisite approval from the Civil Aviation Safety Authority (CASA). Its growth outlook is focused on Melbourne Tullamarine, with service resumption from Melbourne Avalon unlikely in the next year.

The world's top ten routes are in Asia Pacific

The world's busiest air route is...Tokyo Haneda-Sapporo Chitose. Indeed the top ten are all in the Asia Pacific region, which reflects its rise as the world's pre-eminent aviation market. Many of Asia's leading route pairs are in the established markets of Japan and Australia. But it is also interesting that among the airports represented as end points in the top 10 routes, ten of the airports fail to rank in the world's Top 30 airports. Though Sapporo has an enormous seat offer to Haneda, it has far less impact elsewhere.

Storm and then calm as Virgin Australia posts loss

The re-branded Virgin Australia ended its final year as a middle-market carrier AUD66.6 million (USD69.3 million) in the red, a net pre-tax loss it attributes to one-off events that particularly hit the leisure market and which underscores its strategy to move into the more resilient corporate market as a full-service carrier. Under pressure to justify the change, Virgin is showing early indicators of success with more approaches lined up, including what is arguably the boldest move the industry has seen to capture passengers from competitors.