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With a very large land mass and vast uninhabited areas, aviation is vital to Australia's economic and social fabric. Australia’s main international gateways are Sydney, Melbourne, Brisbane, Perth, Adelaide, Darwin, Cairns and the Gold Coast. The commercial aviation market is comprised of four main carriers that serve the domestic routes: national carrier Qantas Airways; Jetstar (Qantas’ LCC unit); Virgin Australia and Tigerair Australia (Virgin's LCC unit).
Australia's Department of Infrastructure, Transport, Regional Development and Local Government – the key regulatory arm for national aviation – has established an open skies policy framework. The Australian Civil Aviation Safety Authority (CASA) monitors safety and maintenance standards, while Airservices Australia is a corporatised (government-owned) air traffic controller.
Airports in Australia
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Tigerair Australia has no immediate plans for expanding its international operation, which launched with three routes to Bali in Mar-2016. However, the Virgin Australia LCC subsidiary plans to expand its international network virtually by linking up with partners from the newly formed Value Alliance.
The Bali operation has been relatively successful, despite the use of aircraft wet-leased from its full service, higher-cost parent. However, for now Tigerair Australia is focused on transferring the three Bali routes to its own fleet as part of a transition from A320s to 737s, rather than pursuing growth.
The Virgin Australia LCC subsidiary could potentially pursue international growth once it secures regulatory approvals to operate international services with its own operator’s certificate. Some domestic growth is also possible once it completes the transition from A320s to 737s in 2019.
Singapore Airlines' (SIA) medium/long haul low cost subsidiary Scoot has confirmed Athens as its first European destination. Scoot plans to commence four weekly flights between Singapore and Athens in Jun-2017, using 329-seat Boeing 787-8s.
Scoot will need to rely heavily on connections beyond Singapore, particularly to Australia, to make the route viable. Australia has a large Greek diaspora. Scoot will not face any LCC competition from Australia or Southeast Asia to Greece but will need to overcome aggressive competition from Gulf carriers – something that full service Singapore Airlines has struggled with. But Scoot's entry pricing is very aggressive.
High load factors will be required to offset low yields but Scoot could struggle to maintain high load factors on a year-round basis, given the seasonality of the Athens market. Scoot could face similar challenges in the other European markets that it is preparing to launch in 2017.
Tigerair Australia has completed a challenging turnaround, with its first annual profit. The LCC, now a fully owned subsidiary of Virgin Australia, was profitable for the first time in its nine-year history in the year ending 30-Jun-2016.
Synergies with Virgin Australia, operational improvements and network adjustments have contributed to the transformation. Virgin Australia has joined its rival Qantas in employing an effective two brand strategy, with Tigerair Australia focused entirely on the leisure sector.
This is the first in a two-part series of reports on the recent performance and outlook for Tigerair Australia. This article will focus on its transformation and newfound profitability. The second will look at potential areas for future long-term growth, including in the international market and with partnerships.
Hong Kong Airlines to grow in Australia via Virgin Australia partnership. Auckland launches Nov-2016
Having built a regional Asian network anchored around mainland China as a source market, HNA Group's Hong Kong Airlines is leveraging its hub capability from short/medium haul connections to long haul transfers, which also reduce CASK. Hong Kong Airlines resumed long haul flying in early 2016 with a service to Cairns and the Gold Coast. Auckland will be added from Nov-2016 and Hong Kong Airlines should be able to break up the Air New Zealand-Cathay Pacific joint venture on the route.
Hong Kong Airlines is restricted from serving major Australian cities due to bilateral limits (Australia and Hong Kong have not been able to agree on increased capacity levels). Hong Kong Airlines' owner HNA has bought into Virgin Australia, which plans to serve the key HNA hubs of Beijing and Hong Kong in 2017, providing access from major Australian cities. Virgin could also help Hong Kong Airlines make viable service to smaller Australian cities.
Hong Kong Airlines is receiving a lift in Australia and New Zealand bookings, attributed to Asian consumers shifting away from travel in Europe, which has repeatedly been impacted by terrorist acts. Hong Kong Airlines believes that passengers are "viewing Australia and New Zealand together as more of a safe-haven status destination".
Malaysia’s AirAsia X is considering the launch of services to several new gateways in Australia. Adelaide, Brisbane, Cairns, Canberra and Townsville are all under consideration as the medium/long haul low cost group resumes expansion.
AirAsia X is also considering launching nonstop flights from Kuala Lumpur to Auckland. The airline launched services to Auckland via the Gold Coast in Mar-2016 and the route has so far exceeded its expectations, prompting it to consider a nonstop product for Auckland and one-stop services to secondary destinations in New Zealand.
This is the second in a series of analysis reports on AirAsia X. The first report looked at the resumption of capacity expansion in the Australia-Malaysia market in 2016 with additional flights to existing markets. This report focuses on possible new destinations in Australia for 2017, and potential growth in New Zealand.
AirAsia X is resuming expansion in the Australia-Malaysia market, offsetting cuts which were implemented in early 2015 as part of a restructuring. The long haul low cost airline will operate 56 weekly flights between Australia and Malaysia in late 2016, matching its previous high of 56 weekly flights in late 2014.
AirAsia X is now looking at further expanding its network in Australia with several potential new destinations. Additional capacity to its four existing destinations – Gold Coast, Melbourne, Perth and Sydney – is also under consideration.
Cuts at Malaysia Airlines have opened up a potential opportunity for AirAsia X to add more capacity to Australia’s four primary cities – where Malaysia Airlines has relinquished traffic rights. AirAsia X has already added capacity from Jul-2016 to the Gold Coast, where there are no bilateral restrictions, and is adding three seasonal weekly frequencies to Melbourne from early Dec-2016.