Hong Kong

Australia must negotiate expanded bilateral agreements, particularly with China

Australia needs to urgently negotiate expanded international air capacity which is constraining access to services from some of the country’s most important markets in Asia along with the United Arab Emirates. Capacity for several Asian markets, including China, Hong Kong, Vietnam, Malaysia and the Philippines, is fully utilised by carriers from those countries which are important source markets for both tourism and trade.

The Australian Government is being criticised for not negotiating new bilateral capacity to keep pace with demand. Melbourne Airport CEO Chris Woodruff said at the Australian Airports Association convention in Nov-2012: “These agreements provide the framework in which we can go out to the international market and attract new air services to meet the increasing demand for travel to and from Australia. The Government needs to lead from the front on this issue. Our bilateral agreements need to provide plenty of capacity for future growth in passenger numbers.”

Myanmar’s first LCC Golden Myanmar prepares to enter international market

Golden Myanmar Airlines is planning to launch services to Singapore on 5-Apr-2013, the first phase of the start-up carrier’s plan to build an extensive international network. The expansion at Myanmar’s first home-grown LCC will further drive up growth in Myanmar’s dynamic international market, which has seen a 67% increase in seat capacity over the last year.

Myanmar recorded 33% growth in international passenger traffic in 2012 and 16% growth in domestic passenger traffic. Even faster international growth is expected in 2013 as several new foreign carriers entered the market in 2H2012 and as a number of new routes are added this year from Myanmar’s two international airports, Yangon and Mandalay.

Local carriers also are responding to the favourable market conditions by growing domestically and internationally. Myanmar’s LCC penetration rate, which is the lowest among the largest seven Southeast Asian countries, will continue to rise in 2013 as Golden Myanmar and foreign LCCs expand.

Hong Kong's low-cost airline presence could triple to 15% of seats in 2015

Hong Kong is no Singapore for low-cost carriers – in early 2013 LCCs account for 5% of all seats at Hong Kong, compared with 27% of seats in Singapore. But Hong Kong is on the verge of a possible rapid structural change that could see LCCs account for approximately 15% of seats in Hong Kong in 2015.

The spike in LCC presence is predicated on a number of factors, including the successful launch of Jetstar Hong Kong, the continued expansion of mainland China’s Spring Airlines and the mooted re-launch of Hong Kong Express into an LCC. The fast ascent of LCCs will level off around the middle or latter part of the decade when almost all slots at Hong Kong airport will likely become utilised, leading to the possibility of a period of almost no growth until the completion of a much-needed third runway, which will not open until around the turn of the decade. Singapore in contrast has enjoyed many years of rampant LCC growth.

As the Hong Kong slot shortage comes closer into view, airlines are participating in an effective slot grab, growing routes or maintaining unprofitable capacity in order to secure slots and hope the services will later be sustainable.

SriLankan Airlines focuses expansion on North Asia as it prepares to join oneworld

SriLankan Airlines is planning to focus expansion on existing and new markets in Asia ahead of the carrier’s ascension into the oneworld alliance. SriLankan is now on course to formally become oneworld’s smallest member in Nov-2013.

The government-owned carrier is currently focused heavily on South Asia, which accounts for 41% of its international seat capacity. SriLankan’s network in South Asia, particularly India and the Maldives, is its main draw to oneworld. But North Asia is SriLankan’s target growth market, with more capacity to greater China and the likely launch of flights to South Korea. SriLankan’s North Asia expansion could be boosted by a relationship with Cathay Pacific, which is sponsoring SriLankan’s membership into oneworld.

Eight North Asian low-cost airline trends to watch in 2013

It certainly took North Asia some years to have momentum for low-cost airlines that was anything like booming Southeast Asia. 2012 delivered on that with three new LCCs launching in Japan and plans underfoot in Hong Kong for Jetstar Hong Kong as well as a possible transformation of Hong Kong Express into a LCC. While elsewhere the region may not have gone as far as producing LCCs, there is active discussion of having LCCs and the reforms needed to welcome and support them.

Talk is strongest in Taiwan, which has seen considerable growth from LCCs in North and Southeast Asia. South Korea is considering how and when its LCCs can become better competitors, shedding some of the comforts they have been unwilling to charge passengers. Japan will see growth, from existing LCCs and new ones, a challenge for incumbents. Reforms in China may enable LCCs in the future to launch, while all LCCs are watching how to be hybrid and chase yields. These are eight North Asian LCC topics to watch for in 2013.

Air Canada seizes on Asian strength while laying the groundwork for key connections in Istanbul

Air Canada is banking on continued strength in its Pacific network into 2013 as it aims to expand its reach into Asia during the summer high season next year through new service to Seoul from its Toronto hub and an expansion of offerings to Beijing and Tokyo Narita. At the same time the carrier is introducing flights between Toronto and Istanbul, Turkey as a means to tap the strength of fellow Star Alliance member Turkish Airlines’ network across central Asia, Africa and the Middle East.

The new flights to Istanbul could be Air Canada’s answer to the growing partnerships that airlines participating in other large global alliances are forging with Gulf carriers, something Air Canada and its major Star partner Lufthansa have so far refused to explore as both carriers have been the most critical of the rapid expansion of Middle Eastern airlines during the last few years.

The moves by Air Canada into Asia during 2H2013 follow the carrier’s strong performance in its existing markets in the region throughout 2012. Presently, Air Canada serves five destinations in the Asia Pacific region – Beijing (from Toronto and Vancouver), Shanghai (from Toronto and Vancouver), Hong Kong (from Toronto and Vancouver), Tokyo Narita (from Vancouver and Toronto) and Seoul (from Vancouver). Asia currently accounts for 10% of Air Canada’s international seats on offer and 26% of its international ASKs.