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Perth Airport is the main gateway to the Perth metropolitan area and the state of Western Australia. Hosting domestic, regional and international passenger and cargo services for over 20 airlines, the airport is a regional hub for Qantas Airways, Virgin Australia Regional Airlines, Skippers Aviation, Alliance Airlines, Cobham and Network Aviation.
Location of Perth Airport, Australia
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Naming 12 Chinese cities would be a challenge for most people outside China. Yet that is how many mainland Chinese cities will so far enjoy non-stop service to Australia in 2016. Until 2011, only three Chinese cities had flights to Australia. This doubled to six in 2014, and will double again to 12 – maybe more – during 2016. A rising middle class coupled with Australia's liberal air service regime and low fuel prices have meant a growing prominence of Chinese aviation, and the visitors it brings.
The growth in Chinese airports with service to Australia coincides with growing Australia-China non-stop city pairs: from nine in 2013 to 21 in 2016. These 21 city pairs are just under the 22 between Australia and its far closer neighbour and partner, New Zealand. New Zealand is Australia's largest source of foreign visitors, but China will soon surpass New Zealand. The 12 months to Nov-2015 made the first year that Australia received more than 1m Chinese visitors, making Australia the second largest long haul market for Chinese visitors after the United States.
Singapore has long been Qantas' offshore international hub, where long haul traffic from Australian capital cities was fed into its European links. Only recently has Qantas focused on Asia as an end market and not a connection point on the "kangaroo route". The change was accelerated by the Qantas-Emirates partnership which prompted Qantas to move its European stopover hub from Asia to the Middle East. With the European flights redirected, Qantas had to reposition itself in Asia.
Initially that meant significant decreases to its Asia network, as capacity was redirected. But in early 2016 Qantas will have more flights from Australia to Asia than it had prior to the Emirates partnership. That is despite now not serving Europe over Asia. Seat capacity is catching up and will further grow as Qantas looks to expand in Asia; already an additional three weekly A330 services are planned for Asia. Driving the increase are a number of factors: Qantas' successful restructuring has lowered its cost base and made Asia profitable, there is growing inbound tourism and Qantas needs to re-deploy widebody aircraft out of the domestic market.
A week after the Australian government granted the State of Qatar – and therefore Qatar Airways – a long-sought capacity increase, Qatar Airways has wasted no time and announced a daily Doha-Sydney service from 01-Mar-2016 on the 777-300ER. This finally places Qatar in Australia's largest city, complementing existing daily services to Melbourne and Perth.
The generous-sounding 50% capacity increase means an additional seven weekly flights to primary gateways for a total of 21 for Qatar. This compares to Emirates' 84 weekly flights to primary gateways. Qatar's scheduled seat capacity into Australia will be 17% the size of Emirates and 44% the size of Etihad. Although Qatar will finally add Sydney to its network, it faces some challenges making European connections work due to its hub structure. One disadvantage it may face too is on-carriage. Qantas – which partners extensively with Emirates – does not carry Qatar's code on any of its services and Etihad and Virgin Australia are partners.
Every two hours, an Emirates aircraft – half of them A380s – departs Dubai for Australia. After India, the UK and US, Australia is Emirates' fourth largest market by seat capacity deployment but second largest, after the US, for available seat kilometres.
About one in every 10 seat kilometres flown by Emirates is en route to Australia. Emirates is the largest international airline in Australia after Qantas while its neighbour, Etihad Airways, is eighth largest. Etihad in Australia punches above its weight: globally it is 37% the size of Emirates but has 45% as many seats to Australia as Emirates does.
Qatar Airways is missing out. If its Australian capacity was in proportion to Emirates the way Etihad's is, Qatar would have around 18,000 weekly seats and 50-60 weekly flights, placing it on the heels of Cathay Pacific as the seventh largest airline in Australia. Instead Qatar has only 14 weekly flights, 4,700 seats and is Australia's 18th largest carrier.
Virgin Australia is adjusting its multi-brand strategy as it hands three of its Bali routes to Tigerair Australia. The changes should succeed at reducing the losses of Virgin’s international operation but the group will ultimately need to make further strategic adjustments if it is to compete effectively in Bali and other medium haul leisure markets against Jetstar's 787s and Southeast Asia’s other fast-expanding widebody LCC operators.
The new Bali routes will mark the launch of international services for the Tigerair Australia brand, which has only operated domestically since launching in 2007. The flights will however continue to be operated under the Virgin Australia air operators' certificate using Virgin Australia pilots, resulting in higher operating costs.
LCC competitors on Melbourne-Bali using widebody aircraft will also continue to enjoy much lower unit costs as Tigerair Australia is not able to configure the 737-800s to maximum density – or operate its own fleet of A320s – due to the length of the route. Tigerair Australia is taking over three Virgin Australia 737-800s, which will be retrofitted into 180-seat all economy configuration.
Malaysia Airline (MAS) is cutting capacity to Australia by over 40% in Aug-2015 as it drops Brisbane and reduces capacity to Adelaide, Melbourne, Perth and Sydney. But Australia remains an important market for MAS and the flag carrier will remain one of Australia’s 10 largest foreign airlines.
The reductions are sensible as for the most part they simply reverse earlier expansion that was overambitious and unsustainable. MAS does risk leaving an opening for competitors, particularly Malaysian rival AirAsia X, but in the current challenging phase of its history it cannot be worried about market share.
This is Part 1 in a series of reports on MAS capacity cuts and the potential impact on the Malaysian and broader Asian markets.
This report focuses on Australia, where the upcoming MAS cuts follow significant capacity reductions made in early 2015 by AirAsia X.