The Australian Aviation Market (article)
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The Australian Aviation Market (article)
FT.com. financial times
A sector in a state of upheaval
By Virginia Marsh and Victor Musat
Published: May 23 2002 10:29 | Last Updated: May 23 2002 10:29
In just two years, the Australian aviation market has gone from having two domestic mainline carriers up to four and back down to two. Yet, even if the country is again faced with a duopoly in inter-state travel, the market is very different to what it was.
Ansett, once the country's blue ribbon airline, has gone bust and Qantas's share of the local market has jumped from between 50 and 60 per cent to more than 80 per cent in the wake of the September 11 attacks which coincided almost to the day with Ansett's collapse.
As for the new entrants on the main trunk routes, one, the locally backed Impulse, has failed. The other, Sir Richard Branson's Virgin Blue has taken off. This is both because of its low cost model and because of the hole in the market left by Ansett's demise; although the Melbourne-based carrier had had problems for some time it still had a 35 per cent market share in the months before its collapse.
Even if Australia has a population of just 19m, its aviation market is large in global terms because of its huge distances and lack of alternative transport infrastructure.
The local market has also been one of the fastest growing - the Sydney-Melbourne route is the third busiest in the world with 4.3m journeys a year. Brett Godfrey, chief executive of Virgin Blue, predicts the local aviation market can easily sustain 5 to 7 per cent annual growth for some years to come.
In spite of Qantas's dominant position, ticket prices on the busiest routes have fallen significantly in the past two years.
Mr Godfrey says that, thanks to the arrival of his Brisbane-based budget carrier, conditions have also become more flexible, including the offering of one-way fares.
Whereas under the old Qantas-Ansett duopoly, a full economy return ticket between Sydney and Melbourne cost up to A$700 unless booked well in advance, both Qantas and Virgin now offer some one way tickets, purchased over the internet, for less than A$100.
As well as responding on price, Qantas, which is as dominant in the A$4bn corporate segment as it is in the overall aviation market, has come up with initiatives such as the CityFlyer, a high frequency, US-style shuttle service between Sydney and Melbourne and, since this year, between Sydney and Brisbane, the country's second busiest route.
It also says that the downturn in the business travel market that started a year ago and was exacerbated by September 11 is showing signs of abating.
"Some companies have come to the understanding that to do business, you've got to be travelling," says Steve Limbrick, Qantas general manager for corporate and government sales. "The signs are much better and the recovery is a bit faster than some might have thought."
Nevertheless, says Peter Harbison, managing director of the Centre for Asia Pacific Aviation, the question remains at to whether companies, many of whom cut back travel budgets sharply in the wake of the US attacks, are reassessing their business travel habits for the longer-term as well as the short-term.
"Growth in business travel within Asia should remain reasonably strong because of the importance of personal relationships," he says. "But at what yield?"
"For a decade now the trend has been for companies to adopt a greater level of austerity [in terms of business travel]," adds Ken Boundy, managing director of the Australian Tourism Commission.
Questions also remain as to whether the domestic market will ever be able to sustain a third carrier on the main trunk routes. There are also a handful of small operators which operate in regional and rural Australia.
Mr Godfrey and Mr Harbison both think another carrier could yet emerge if it were targeted at a particular niche; Mr Boundy, although he would welcome a new entrant, is more doubtful.
"History suggests there isn't room for more than two," he says.
Still, the sector is waiting to see how the Star Alliance will respond to the gap Ansett's demise has left in its network. It now has no local partner although Mr Godfrey says Virgin is in talks with at least one Star Alliance member over the possibility of inter-lining sharing ticketing and providing baggage and other services.
Maintaining Star Alliance services in and out of Australia from the likes of Singapore Airlines, Thai, United and Air New Zealand is critical, however, if the country is to meet its ambitious tourism targets. With a 12 to 13 per cent share in Australia's international traffic, SIA, is the second biggest carrier flying into the country after Qantas which has a share of just over 30 per cent.
According to Stephen Forshaw, SIA's spokesman in Australia, the airline has increased its services into Australia by some 50 per cent since 1998, recently adding extra flights to Brisbane.
Singapore Airlines has been able to weather Ansett's collapse relatively well, he says, because it operates direct flights in and out of several Australian cities, meaning that its customers are less likely to need connecting services. It flies to Sydney three times a day, as well as twice a day to Melbourne and 18 times a week to Perth.
Via its hub in Singapore, it also offers the best connections between Australia and Europe, offering direct flights to more than 10 European cities, in contrast to Qantas which now flies only to London, Paris, Frankfurt and Rome, also via Singapore or Bangkok.
The increase in SIA services has helped counterbalance the withdrawal of most European airlines: Lufthansa, KLM and Alitalia are among the recent departures, leaving just British Airways, Olympic and Lauda.
Nevertheless, Mr Harbison says there is a very real danger that insufficient international services will threaten Australia's ambition to double the number of overseas visitors it receives each year to 10.4m by 2012.
A sector in a state of upheaval
By Virginia Marsh and Victor Musat
Published: May 23 2002 10:29 | Last Updated: May 23 2002 10:29
In just two years, the Australian aviation market has gone from having two domestic mainline carriers up to four and back down to two. Yet, even if the country is again faced with a duopoly in inter-state travel, the market is very different to what it was.
Ansett, once the country's blue ribbon airline, has gone bust and Qantas's share of the local market has jumped from between 50 and 60 per cent to more than 80 per cent in the wake of the September 11 attacks which coincided almost to the day with Ansett's collapse.
As for the new entrants on the main trunk routes, one, the locally backed Impulse, has failed. The other, Sir Richard Branson's Virgin Blue has taken off. This is both because of its low cost model and because of the hole in the market left by Ansett's demise; although the Melbourne-based carrier had had problems for some time it still had a 35 per cent market share in the months before its collapse.
Even if Australia has a population of just 19m, its aviation market is large in global terms because of its huge distances and lack of alternative transport infrastructure.
The local market has also been one of the fastest growing - the Sydney-Melbourne route is the third busiest in the world with 4.3m journeys a year. Brett Godfrey, chief executive of Virgin Blue, predicts the local aviation market can easily sustain 5 to 7 per cent annual growth for some years to come.
In spite of Qantas's dominant position, ticket prices on the busiest routes have fallen significantly in the past two years.
Mr Godfrey says that, thanks to the arrival of his Brisbane-based budget carrier, conditions have also become more flexible, including the offering of one-way fares.
Whereas under the old Qantas-Ansett duopoly, a full economy return ticket between Sydney and Melbourne cost up to A$700 unless booked well in advance, both Qantas and Virgin now offer some one way tickets, purchased over the internet, for less than A$100.
As well as responding on price, Qantas, which is as dominant in the A$4bn corporate segment as it is in the overall aviation market, has come up with initiatives such as the CityFlyer, a high frequency, US-style shuttle service between Sydney and Melbourne and, since this year, between Sydney and Brisbane, the country's second busiest route.
It also says that the downturn in the business travel market that started a year ago and was exacerbated by September 11 is showing signs of abating.
"Some companies have come to the understanding that to do business, you've got to be travelling," says Steve Limbrick, Qantas general manager for corporate and government sales. "The signs are much better and the recovery is a bit faster than some might have thought."
Nevertheless, says Peter Harbison, managing director of the Centre for Asia Pacific Aviation, the question remains at to whether companies, many of whom cut back travel budgets sharply in the wake of the US attacks, are reassessing their business travel habits for the longer-term as well as the short-term.
"Growth in business travel within Asia should remain reasonably strong because of the importance of personal relationships," he says. "But at what yield?"
"For a decade now the trend has been for companies to adopt a greater level of austerity [in terms of business travel]," adds Ken Boundy, managing director of the Australian Tourism Commission.
Questions also remain as to whether the domestic market will ever be able to sustain a third carrier on the main trunk routes. There are also a handful of small operators which operate in regional and rural Australia.
Mr Godfrey and Mr Harbison both think another carrier could yet emerge if it were targeted at a particular niche; Mr Boundy, although he would welcome a new entrant, is more doubtful.
"History suggests there isn't room for more than two," he says.
Still, the sector is waiting to see how the Star Alliance will respond to the gap Ansett's demise has left in its network. It now has no local partner although Mr Godfrey says Virgin is in talks with at least one Star Alliance member over the possibility of inter-lining sharing ticketing and providing baggage and other services.
Maintaining Star Alliance services in and out of Australia from the likes of Singapore Airlines, Thai, United and Air New Zealand is critical, however, if the country is to meet its ambitious tourism targets. With a 12 to 13 per cent share in Australia's international traffic, SIA, is the second biggest carrier flying into the country after Qantas which has a share of just over 30 per cent.
According to Stephen Forshaw, SIA's spokesman in Australia, the airline has increased its services into Australia by some 50 per cent since 1998, recently adding extra flights to Brisbane.
Singapore Airlines has been able to weather Ansett's collapse relatively well, he says, because it operates direct flights in and out of several Australian cities, meaning that its customers are less likely to need connecting services. It flies to Sydney three times a day, as well as twice a day to Melbourne and 18 times a week to Perth.
Via its hub in Singapore, it also offers the best connections between Australia and Europe, offering direct flights to more than 10 European cities, in contrast to Qantas which now flies only to London, Paris, Frankfurt and Rome, also via Singapore or Bangkok.
The increase in SIA services has helped counterbalance the withdrawal of most European airlines: Lufthansa, KLM and Alitalia are among the recent departures, leaving just British Airways, Olympic and Lauda.
Nevertheless, Mr Harbison says there is a very real danger that insufficient international services will threaten Australia's ambition to double the number of overseas visitors it receives each year to 10.4m by 2012.
