Aussies have always been big travellers, despite being far away from anywhere. And Australia has long been a popular destination for incoming travellers. The country is a popular tourist destination and as the world’s 12th biggest economy generates lots of business traffic
But nothing stays still, and this article is going to take a look at the future of Australian aviation over the next decade. Given how fluid the aviation sector is, speculation beyond a decade is really just conjecture. But current trends and developments do allow us to make some reasonably confident predictions about where Aussie aviation is heading in the 2020s.
Five key points come to mind
1. The continuing success of Qantas;
2. Virgin Australia heads for a shakeout;
3. The success of low-cost carriers in Australia;
4. The rise of the big Chinese carriers; and
5. The current Gulf carriers will lose some relevance.
The continuing success of Qantas
Qantas isn’t putting a foot wrong these days. Under CEO Alan Joyce, the airline has flown out of its earlier financial woes and is powering ahead. We are seeing new routes, new aircraft, profitability and an increasing assuredness from the national carrier.
The airline is in a good position to reinforce and enhance its dominance in the Australian market and on key international routes in and out of the country. The arrival of the 787-9s has seen the airline start non stop flights between Perth and London. Next year, Qantas is starting flights to Chicago.
Alan Joyce is pushing both Airbus and Boeing to produce an aircraft that is capable of flying non stop from Australia’s east coast to London and New York. Cape Town and Rio are also in his sights.
Qantas is in a strong position moving into the 2020s.
Virgin Australia heads for a shakeout
The outlook is not so rosy for its local competitor, Virgin Australia. While the airline is not likely to go the way of Ansett, there are three things we might expect to see change in the short to medium term.
Firstly, the airline’s ownership structure is unwieldy. The strategic interests of Singapore Airlines, HNA, Etihad, Virgin, Nashan, and the minority shareholders don’t necessarily align. This might be ripe for a shakeout.
Secondly, Virgin Australia needs to return to profitability. Continuing losses undercut confidence in an airline which offers passengers a pretty good product.
Thirdly, the viability or otherwise of Virgin Australia’s international flights are something that Aussie frequent flyer forums have long tossed around. We know their Hong Kong flights are struggling, although the recent approval for a tie up with Virgin Atlantic may help alleviate that.
Does Virgin Australia need to have international operations or should it just concentrate on competing domestically with Qantas? That’s something we could expect to see answered over the next few years.
The success of low-cost carriers in Australia
Low-cost carriers are doing well both flying within and flying to and from Australia.
Qantas low-cost offshoot Jetstar is Australia’s low-cost carrier powerhouse, covering Australia, the South Pacific, and Asia. Virgin’s low-cost offshoot, Tiger, lacks the capacity and market penetration of Jetstar and is doing less well.
Asian low-cost carriers such as Scoot, Air Asia, and Air Asia X are making their presence felt at airports around the country. And not just the big airports – they have a tidy business flying in and out of the Gold Coast as well.
These medium-haul routes – 7 to 10 hours – are a big effort in a low-cost carrier, but their keen pricing means travellers are willing to put up with leg cramps in order to have more money to spend in Bali or Singapore.
We could expect to see more and more travellers willing to trade comfort for price over the short to medium term. As the Asian low-cost carriers continue to roll out capacity, their presence in Australia should step up, stimulating passenger numbers and offering travellers more choice.
Jetstar looks like only strengthening its local market position as the domestic low-cost carrier king. Their flights into Bali and Asia are also pretty solid. The future of Tiger is a whole other scenario. It is a drag on Virgin’s finances and many aviation observers believe its days are numbered.
The rise of the big Chinese carriers
Like the Gulf carriers of ten years ago, the big Chinese carriers will continue to ramp up their presence in the Australian market. The China Southern livery is already as familiar as the Emirates colours. And we are seeing improvements in both the hard and soft products as China’s various airlines become increasingly competitive with more established carriers.
They’ll target travellers on the busy Australia – China route and passengers who use their Chinese airport hubs as transit ports for onward travels, emulating the Emirates Dubai model.
As the big Australian cities become saturated with flights, we might see some of the Chinese carriers opening up routes to smaller airports. China – Hobart is an interesting idea. Other novel and niche routes would include China – Darwin, China – Gold Coast, and China – Canberra.
While the economics of these routes might not immediately stack up, the point might be to establish market presence and incumbency on the route. Many of the Chinese carriers are government-backed or have quasi-government backing. With that kind of support, profits don’t need to be the only strategic objective.
The Gulf carriers will lose relevance
Concurrently with the ramping up of the Chinese carriers, we are seeing a gradual erosion of capacity and flights by the big Gulf carriers. Financially pummelled Etihad and Emirates have both reduced their presence in the Australian market in the last couple of years.
Qatar has also trimmed flights, but it never had the presence of Emirates, with its four daily flights from both Sydney and Melbourne to Dubai. Qatar has also stepped in where other airlines dare not go. It successfully opened the Adelaide – Doha route. It also added the Canberra tag flights onto one of its Sydney flights – how well that is going is open for debate.
The hub and spoke model of the Gulf carriers is under threat as new aircraft types come online, capable of flying further and threatening the need for stopovers in big transit ports like Dubai and Abu Dhabi.
These points aren’t exclusive or exhaustive. They reflect some of the trends we see happening in Australian aviation over the next decade.
If you have some further ideas to add or disagree with points made, we’d welcome you posting a comment.