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Airlines ride Australia’s international demand wave: part one – Cathay Pacific & Philippine Airlines

Analysis

The boom in demand for travel to and from Australia shows no sign of abating, making this market a key part of the international recovery strategies of many overseas airlines.

United Airlines is making a major push into Australia in the upcoming southern summer season, while Cathay Pacific and Philippine Airlines have quickly rebuilt towards their pre-pandemic levels.

Vietjet has been a notable addition to this market, with the launch of new routes to the largest Australian cities and plans for further expansion.

Senior executives from these four airlines talked about their Australian operations and plans during the CAPA Australia Pacific Aviation Summit held in Brisbane on 14-15-Sept-2023. Tourism Australia also gave some insights into the bigger-picture trends in the Australian market.

Part one of this report will look at the market overview, and Cathay Pacific and Philippine Airlines.

Part two will discuss United Airlines and Vietjet, along with some of the continuing post-pandemic challenges facing airlines.

Summary:

  • Australian international visitor total has returned almost to 80% of pre-pandemic levels.
  • Traffic from some countries is recovering more quickly, and VFR versus tourist mix is changing.
  • Cathay Pacific expects to lift Australia frequencies from 42 per week to 60 by year-end.
  • Philippine Airlines has fully recovered its Australian capacity and added a new Perth route.

Australia’s international rebound has been strong overall, but specific markets vary considerably

Australia is continuing to see “steady growth” in international visitor numbers in line with capacity increases, said Andrew Hogg, Tourism Australia’s executive general manager for eastern markets and aviation. The overall visitor total recovered to almost 80% of 2019 levels for Jul-2023, according to data from the Australian Bureau of Statistics.

Australian monthly visitor arrivals, 2019-2023

However, the recovery has been uneven, with some markets doing better than others.

For example, visitor numbers from India have exceeded 2019 levels for most of 2023. The US total has also climbed, with tourist numbers reaching 91% of pre-pandemic totals in Jul-2023.

Japan had a slow start, but is now up to 71% of 2019 levels, Mr Hogg said. Visitor numbers from China have risen to more than 50% of 2019 levels, despite travel restrictions easing only about six months ago.

China is a very important for Australian tourism, representing its largest source of tourist numbers and visitor spending before the pandemic.

There has been a change in the overall mix of visitor types, said Mr Hogg. The early wave of international travellers to Australia were predominantly in the visiting friends and relatives (VFR) category. However, the ratio has been changing this year, with holidaying tourists constituting a greater share.

VFR numbers are not waning, but rather staying flat, Mr Hogg said. Tourist numbers are likely to continue increasing much more rapidly, despite airfares staying high.

Cathay Pacific is looking to make major frequency increases before the end of 2023

Australasia – including Australia and New Zealand – is “one of the fastest recovery regions for us”, said Frosti Lau, Cathay Pacific’s regional general manager (designate) for Southwest Pacific.

Cathay Pacific now has 42 weekly flights to Australia, and by the end of 2023 it will have lifted this to 60 per week, said Mr Lau – this is a notable increase from single digit levels in mid-2022.

Cathay Pacific: capacity between Hong Kong and Australia, by one-way seats, 2020-2023

Traffic on the so-called kangaroo routes to Europe via Hong Kong has been healthy, as has demand between Australia and Southeast Asia and India.

“Our flights [to and from Australia] are quite full, and that’s why we’ve been increasing [frequencies]”, said Mr Lau. The Hong Kong-Sydney route will soon rise to four times daily, and Melbourne to three times daily. Frequencies to Brisbane and Perth are also growing.

Cathay Pacific’s weekly flight numbers to Australia are still down from approximately 77 before the pandemic, according to data from CAPA - Centre for Aviation and OAG. However, the airline’s international recovery started about a year later than most other Asian airlines due to the Hong Kong government’s conservative approach to easing pandemic-related operational and travel restrictions.

Traffic from Northeast Asia to Australia has been “the missing piece”, as it has been slower to recover, Mr Lau said.

The mainland China market has begun to improve, with visa applications increasing dramatically. It has also helped that the Chinese government has added Australia to the list of countries approved for tour group travel.

Philippine Airlines has pushed its Australian services beyond 2019 levels, including a new route

Philippine Airlines (PAL) is on track to record a record profit in 2023, and the Australia market “has certainly been a key part of that success”, said Christoph Gaertner, the airline’s vice president for network planning and external affairs.

The airline reached pre-pandemic capacity levels in this market in Dec-2022, and has since exceeded them. PAL has resumed its routes to Sydney, Melbourne and Brisbane, and the airline launched a new service to Perth in late Mar-2023.

Philippine Airlines: capacity between the Philippines and Australia, as measured in weekly seats, 2020-2023

Another weekly frequency to Brisbane is set to be added next month. “When we have the opportunity to expand sustainably [in Australia], we will do so”, Mr Gaertner said.

Load factors on Australian routes are slightly higher than before the COVID-19 pandemic, he said. Fares are still significantly higher, but are starting to come down versus their peaks in 2022.   

PAL operated a flight to Auckland before the COVID-19 pandemic, but it has yet to resume. While the airline is still interested in the New Zealand market, there is no return planned in the short term, said Mr Gaertner.

The airline competes against the Philippine-based low cost carrier Cebu Pacific on many of its routes to Australia. However, there is plenty of room in this market for both airlines, Mr Gaertner noted.

About 800,000 passengers per year travel between the Philippines and Australia, and the total is set to continue growing.

In part two of this analysis CAPA - Centre for Aviation will consider United Airlines and Vietjet, and post-pandemic challenges for overseas airlines in the Australian market. 

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