The news yesterday that Virgin Australia had been tentatively awarded one of the two fiercely contested Haneda slots available to Australian airlines surprised nobody. Australia’s International Air Services Commission’s draft decision was equitable and fair, dividing the spoils between Virgin Australia and Qantas. Having got what they wanted, the race is now on for Virgin Australia to get the flights up and running by 29 March 2020.
What will it mean for Australia?
On the broadest level, it introduces competition to a route that is tightly held by the Qantas / Japan Airlines joint venture. In the year ending 30 June 2019, there were 3,177 scheduled passenger services between Australia and Japan – that’s about nine flights a day.
The existing carriers flying between Australia and Japan are Qantas, Jetstar, Japan Airlines and All Nippon Airways. The table below breakdown the flights and market share by carrier.
|No of flights (2018)||% Market share||Passengers carried (2018)||% Market share|
Qantas has the biggest slice of the market. Between it and its low-cost subsidiary, Jetstar, it operated 65% of the flights to Japan in 2018 and carried over 76% of passengers between Australia and Japan. Nice work if you can get it. Qantas also codeshares with its oneworld partner Japan Airlines. This cozy trio of airlines has some 90% of the market between Australia and Japan sewn up. No wonder Qantas was in a dudgeon about Virgin Australia’s proposed entry into the market.
Competition brings choice and it invariably puts downward pressure on airfares. For passengers, this is a plus. For incumbent airlines on the route, it’s not so great.
At least one new direct route
Passengers will get at least one new route out of IASC’s draft determination – VA’s proposed Brisbane – Haneda route. Neither ANA or Japan Airlines fly into Brisbane and Qantas operates only Narita flights from Brisbane. A second new route may open up if Qantas elects to operate Melbourne – Haneda with their new slot rather than add a second daily flight to Haneda out of Sydney. I imagine there’s some pondering and number crunching going on at Qantas this week (when they’re taking breaks from burning effigies of VA’s boss Paul Scurrah).
IASC’s draft determination also gives ANA a greater presence in Australia. It is currently the smallest incumbent on the Australia – Japan route but has recently started flying to Perth (in addition to its existing Sydney flight) which will expand its market share on the 2018 figures.
Virgin Australia’s application to IASC was predicated on a codeshare arrangement with ANA whereby Australian passengers would be funneled onto ANA’s domestic services in Japan and ANA’s passengers would be funneled onto Virgin Australia’s domestic services in Australia. In essence, it’s a similar deal to the existing Qantas / Japan Airlines tie-up.
So what will IASC’s draft determination mean for Australia? More competition, more capacity, downward pressure on prices, new routes, and more airline joint ventures. And while the focus has been very much on Australian airlines while they’ve tussled over the available slots at Haneda, two slot pairs are also been made available for Japanese airlines to use on their Australian services. The changes in the Australia – Japan aviation market aren’t over yet.