Foreign carriers dominate Australia

A report in The Australian by Derek Sadubin of the Centre for Asia Pacific Aviationsays that it you’re booking travel overseas from Perth or Brisbane there are seven chances out of 10 you’ll be flying with a foreign airline.

Both airports’ international networks are dominated by foreign airlines, with more than 70 per cent of seats provided by carriers based offshore.

Only Cambodia’s Phnom Penh and India’s Bangalore and Hyderabad airports have a higher proportion of total seats provided by foreign airlines, according to a Centre for Asia-Pacific Aviation survey of major airports in the region.

Foreign carriers also dominate traffic at Mumbai, Kolkata and Delhi airports, because of long-term underinvestment in the fleets of India’s national airlines. This is changing as Air India takes delivery of a new fleet of 68 Boeing aircraft and launches a massive international route expansion program alongside private carrier Jet Airways.

The situation is similar, but not as dramatic, in Melbourne, where roughly 65 per cent of international seats are provided by foreign carriers, while at Sydney, main base of Qantas, six of every 10 seats on international routes are scheduled by foreign airlines.

Qantas operates about 90 international services weekly from Sydney and almost 70 weekly at its main international hub at Singapore.

Several factors are contributing to the very high foreign airline presence at Australia’s international airports, particularly Brisbane and Perth.

Firstly, Australia has one of the most liberal policies in global aviation, designed to stimulate inbound tourism. This stance, including an open-skies policy for regional airports, has encouraged foreign airlines to enter the market.

Secondly, economic booms in Queensland and Western Australia are creating strong demand for air travel and stimulating a population explosion, particularly in southeast Queensland.

According to Brisbane Airport Corporation commercial services executive manager Gert-Jan de Graaff, more than 1500 new residents are settling in Queensland each week and the airport is serving the second fastest growing region in the western world.

Perth and Brisbane airports have been very successful in attracting new airlines. For example, Abu Dhabi’s Etihad Airways will begin new services to Brisbane in September, followed by China Eastern Airlines to Shanghai later in the year.

Another factor is the pullback by Qantas of mainline international operations in recent years as it focused on efficiency and profitability, particularly as fuel costs soared, although the airline is selectively adding capacity in key markets, such as the Australia-US route.

The mainline international capacity of Qantas, measured in available seat kilometres, in the 11 months to May 2007 fell by 4.3 per cent, but Jetstar is quickly expanding on international routes, filling the void left by its full-service parent.

Jetstar will be vital in reinvigorating the international presence of Qantas in coming years, particularly in the fast-growing Asian region.

The final factor is purely geographic: airports in this part of the world are at the end of the line, making it more difficult for local carriers to develop major international hubs.

Foreign carriers control a much lower 55 per cent of international capacity at Auckland Airport. Dubai Aerospace Enterprise (DAE) has made a takeover bid for the major New Zealand gateway.

As part of its bid, DAE pledged to use “reasonable endeavours” to create new routes and services to Auckland for Emirates. The Middle East carrier reportedly has a long-term plan to use Auckland as a base from which to launch operations to the west coast of North America and Central and South America.

It may also complete a round-the-world link between Dubai, South Africa and Auckland. Not surprisingly, Air New Zealand announced it intended to make a “detailed submission” to the New Zealand Overseas Investment Commission in an attempt to prevent DAE from gaining control of Auckland Airport on concerns Emirates could be given preferential treatment.

By contrast, Asia’s “fortress hubs” all have a dominant (more than 50 per cent) local carrier share of international traffic. These include Singapore, Hong Kong, Kuala Lumpur and Incheon in Korea.

All these hubs rely heavily on sixth-freedom traffic, that is, airlines connecting bilateral rights between two separate countries over their home hub.

While this presents an obvious advantage for local carriers, which can funnel passengers from numerous points on their networks, competition between the major hubs is intensifying.

Meanwhile, the threat always looms of new aircraft technology that can simply overfly intermediate points, and can shift the balance of power to other, even more favourably located, regions.

Jetstar, for example, unlike its parent, will be flying non-stop to its destinations, mostly avoiding the Singapore hub.

The growing Middle East hubs of Dubai, Doha and Abu Dhabi are quickly becoming the new centre of gravity in global aviation. These hubs have even higher levels of home carrier domination than their Asian counterparts, and rapid growth is being driven by massive fleet orders and network expansion.

Middle East airline traffic grew at three times the global average in the first half of 2007. As a group, the Middle East airlines and their hubs are quickly becoming a dominant force, particularly in this region.

Because of its location, the Middle East will be an irresistible stopover for many airlines with ultra-long-range aircraft. Even Qantas has announced plans to fly via the region in the medium term.

The airlines at Asia’s fortress hubs are fighting back. Cathay Pacific chief executive Tony Tyler said last month the airline faced “enormous competition” from Middle East carriers.

The Hong Kong-based airline is scheduled to take delivery of an average of 10 widebody aircraft annually over the next five years. Cathay intends to strengthen its services on a number of routes, with additional flights to New York and San Francisco.

Australia’s airports are also set to benefit, not only from Cathay’s expansion (including a doubling of capacity to Adelaide, a third daily service to Melbourne and additional capacity to Perth later in the year), but from other Asian carriers keen to keep their share of the pie and new entrants such as Jetstar, which are intent on growing the pie.

The Centre for Asia-Pacific Aviation will next week launch a landmark study on prospects for Middle East aviation.

More information on this free report is available at www.MiddleEastAviation.aero

Derek Sadubin is the chief operating officer of the Centre for Asia Pacific Aviation 

Report by The Mole