- IATA Code
- International Airlines serving this region (excluding codeshares)
Location of Asia Pacific
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Virgin Australia and Tigerair Australia are beginning to flex their muscles with Tigerair Australia making its first strategic move since becoming part of the Virgin Australia Group in Apr-2013 by launching direct services between Sydney and Perth as the carrier takes delivery of its 12th A320 in Dec-2013.
Virgin Australia meanwhile has taken another step to challenge Qantas’ domestic regional network domination with the launch of the first direct link between its home base of Brisbane and Cloncurry.
The changes signal the start of Virgin Australia’s ambitions to duplicate the successful Qantas/Jetstar model which seeks to separately maximise the returns from the full service and leisure markets.
Qantas and Virgin Australia appear to have reached an uneasy armistice in their domestic capacity war that added nearly 8% in seat capacity in the year to 30-Jun-2013. But a stay in hostilities is likely to be temporary at best, with neither side laying down arms.
Indeed, after Qantas offered an olive branch by stating it would limit its domestic capacity increases to between 1.5% and 2% for the first half of FY2014, Virgin Australia responded the next day by declaring it would grow capacity by up to double that amount. And that does not include any increase that its newly acquired 60% subsidiary Tigerair Australia may have planned.
Virgin Australia CEO John Borghetti also provocatively stated that Virgin Australia Regional Airlines, bolstered by the acquisition of Perth-based Skywest, will soon seek to break more Qantas monopoly routes, placing more pressure on fares and yields.
Virgin Australia reported a statutory loss after tax of AUD98.1 million (USD87.8 million) for the financial year to 30-Jun-2013, coming in at the lower end of its surprise profit warning issued on 05-Aug-2013, largely due to a tough competitive domestic environment, a slowing economy and large one-off restructuring and business transformation costs.
During FY2013 Virgin Australia undertook the monumental task of switching to the SabreSonic bookings system, acquired Western Australia regional carrier Skywest to expand its reach into the regional and lucrative fly-in-fly-out contract markets and took a 60% controlling stake in LCC Tigerair Australia providing the group with a dual brand strategy to match the Qantas/Jetstar model.
Two years into a five year transformation programme, Qantas sees the light at the end of the tunnel, reporting an underlying profit before tax of AUD192 million (USD172 million) for the financial year to 30-Jun-2013 against a backdrop of high fuel costs, excess domestic capacity and intense competition in its international markets.
The result, however, benefits from an AUD134 million (USD120 million) accounting estimate change relating to bringing forward accounting of passenger revenue. Without this adjustment the underlying result would have been AUD58 million (USD52 million).
But Qantas’ previously troubled international business is on the mend as the first benefits from the cornerstone alliance with Emirates begin to flow, costs are removed and loss making routes exited as well as aircraft reconfigured and alliances expanded, particularly in Asia.
CEO Alan Joyce stated: “Our financial position has been strengthened by the actions we have taken over past 12 months: reducing debt, extending our maturity profile and taking a prudent approach to capital expenditure". But Qantas has not provided profit guidance for the year ahead as the operating environment in the first half of FY2014 remains volatile.
Air New Zealand has reported underlying earnings of NZD256 million (USD200 million) for the financial year to 30-Jun-2013 and in so doing delivering on its promise to more than double profits on the prior year. The net profit after tax was NZD182 million (USD142 million), up 156% on the previous year.
The result, which is at the upper end of the guidance range provided in Jun-2013, follows up on the 300% improvement reported in the first half of FY2013 with all parts of the network contributing profitably.
Chairman John Palmer stated the result places Air New Zealand amongst the best performing airlines globally. “We are focused on further improving on this result in the 2014 financial year. Based on the airline’s forecast of market demand and fuel prices at current levels, early results and forward bookings are encouraging. Our expectation is that next year we will improve on the result that we have announced today.”
Australia’s outbound market has continued to strengthen while its inbound market has been relatively stable in recent years.
Australian residents took a record 8.4 million short-term trips overseas in the financial year ended 30-Jun-2013, according to the Australian Bureau of Statistics (ABS), up from 8 million trips in 2012 and nearly three times the number from 10 years ago when 3.3 million short-term departures were recorded.
This growth has been largely driven by Australia's strong resources fuelled economy, with a high AUD making international travel more appealing for Australians compared to a domestic holiday. The recent substantial fall in the AUD has not yet had time to make its effects felt at the consumer end, but the approximately 15% fall against the USD since Apr-2013 (and against those currencies linked to the USD) will be causing pain to airlines whose reliance on Australian outbound traffic is high.
Despite the AUD losing ground however, there appears to be little lessening of appetite for Australians to travel – at least in the short term.