Sydney Kingsford Smith Airport

European woes force changes for the better at Indian Ocean carriers, with Air Austral the latest

Hardest hit from the European economic situation, aside from the carriers that have collapsed, are far away from continental Europe in the Indian Ocean, which contains the self-proclaimed Vanilla Islands grouping of countries: La Reunion, Madagascar, Mauritius and Seychelles. These nations' carriers are largely dependent on European leisure traffic, which has evaporated in the dual threat of weakening economies and high fuel prices that provide no stimulation to whatever demand is left.

The starkness of the situation has been demonstrated most recently by Air Austral, which over the northern winter will reduce its long-haul network to a single destination and will postpone – or possibly cancel – its order for two Airbus A380s, following it being unable to pay for a new Boeing 777 awaiting delivery. Air Austral is also looking to partner with Air Mauritius to maintain a connection to Australia, a further sign that the situation in Europe is forcing the Vanilla Island carriers to make medium/long-term strategy changes that will finally strengthen them. Etihad Airways earlier this year acquired a stake in Air Seychelles and is now lending management oversight to the Seychelles flag carrier while the region's other carriers have conducted overdue network reviews.

Qantas in a changing world: quantifies refocused international strategy and limits capital exposure

Qantas' withdrawal from a series of international routes promises the single largest benefit to its loss-making international division, delivering AUD100-120 million (USD101-122 million) in annual benefits, with the majority to be realised in FY2013. But with the international division reporting a loss of AUD216 million (USD219 million) in FY2012, Qantas will continue to operate a number of unprofitable routes, primarily to Europe and Asia.

Qantas expects to reduce those losses through the reconfiguration of its Boeing 747-400 and A380 fleets, which when complete towards the second half of FY2014 will deliver AUD70-90 million (USD71-91 million) of benefits annually. Qantas previously put those retrofit changes at a cost of AUD400 million (USD406 million). They include reconfiguring nine 747-400s to have no first class while 12 A380s have a reduced number of business class seats but more economy and premium economy seats.

Melbourne and Sydney airports wage PR wars with strategic partnerships

The recent history of Australia's two main airports – Melbourne and Sydney – has been one of Melbourne being on the offensive to capture traffic that went to Sydney by default while Sydney sat back, even as its growth lagged that of its competitor. But that is no more. A revitalised Sydney airport, with the backing of a new government, is out to hold its place. That was evident at last week's annual Routes Asia forum where both Melbourne and Sydney took the opportunity to announce respective strategic partnerships to drum up support.

Australian resource flying to further expand to east coast, possibly internationally in medium-term

As Australia's domestic market shows signs of slowdown, increasingly presenting itself as an opportunity for mainline Australian carriers is flying for the booming resource sector. The resource industry flying has been heavily concentrated in Perth, where charter carrier with small aircraft sub-737/A320 size can effectively reach most of the state of Western Australia, where the majority of resource work occurs, although increasing amounts are in Queensland too.

But as Perth becomes saturated – from peak aircraft movements, housing availability and skilled labour – resource companies will be increasingly pulling from the country's more populous east coast. These distances place restrictions on existing charter carriers, creating the opportunity for Qantas and Virgin Australia to fill demand just as their traditional regular public transport markets are weakening. In a second phase of growth, resource flying could even be extended to Southeast Asia to tap that region's skilled labour pool, if Australian immigration policies allow.

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.

AirAsia X and Scoot help make Sydney Australia's hub for low-cost long-haul carriers

The inaugural AirAsia X flight arriving into Sydney on 02-Apr-2012 is ushering in the era of low-cost, long-haul carriers at Australia's largest airport, which is poised to take the title of offering the most service from low-cost long-haul carriers between Australia and Asia. While Jetstar already links Sydney to long-haul destinations and previous carriers like Viva Macau tried, this new wave is of carriers going beyond point-to-point traffic to offer connections out of large Asian hubs.

AirAsia X will be followed by Scoot, and the presence of a Singapore low-cost long-haul carrier in Sydney makes it likely that Jetstar too will enter the Sydney-Singapore market, although parent company Qantas will have to accept that corporate routes previously in its exclusive domain must now be shared if it wants to remain relevant in a market with increasingly diversifying traffic.

The sudden influx of long-haul LCCs can be attributed to competitive responses but also the new government in New South Wales that is eager to better promote Sydney Airport.