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market in the region is still growing, Alan Polvnick, a partner in inter-
national law firm Watson Farley and Williams, told delegates. LCCs
have completely changed the market and are constantly adapting
to it, resulting in a dynamism in the region, he says. People are
more comfortable flying medium or long-haul services with LCCs,
as evidenced by the success of existing operators, says Polvnick.
Long-haul LCCs have a “solid future” in certain markets, accord-
ing to Rick Howell, chief operations adviser to Cebu Pacific, which
links the Philippines with points in Southeast Asia, Japan, Korea,
China, Australia and the Middle East. Cebu Pacific has become the
dominant carrier operating between the Philippines and Sydney, has
doubled the size of the market in the last six months, reduced the
average fare by 30 percent and its two biggest competitors haven’t
lost any passengers. “It’s an excellent demonstration of low-cost
market stimulation,” says Howell.
Sydney Airport managing director and chief executive, Kerrie Ma-
ther, acknowledges the very positive economic backdrop compared
with previously. Sydney Airport already serves 70 percent of the
world’s population, with services to 94 destinations by 44 airlines,
carrying 42 million passengers. Traditional markets remain important
for Sydney Airport, but there is strong pan-Asian growth, with Indian
traffic up 22 percent, a 7 percent increase in traffic to Southeast
Asia, 23 percent rise to China and North Asia and 3 percent growth
to New Zealand and the Pacific. The Chinese market from Sydney
alone has grown substantially, from three cities served three years
ago to 14 cities now and 15 in the near future, says Mather.
Connections between Australia and China are set to boom following
the Open Skies agreement between Australia and China at the end of
last year. The “landmark agreement ” is the first such Open Skies deal
China has signed with any country and follows years of incrementally
adding services between Australia and China, says Stephen Borth-
wick, acting executive director, aviation and airports at the Australian
Department of Infrastructure and Regional Development.
One of the largest threats to Australian carriers flying to China lies
in their own home market, however, according to lawyer Polvnick,
who noted how easy it is to set up a foreign airline in Australia. “ You
can set up a 100 percent foreign-owned airline in Australia, and in
fact you don’t even need a lawyer, you can fill in the forms yourself,”
he says. He suggests there is a gap in the market for a Chinese
company to set up in Australia. “I watch with interest to see when a
big Chinese airline or tour organisation says ‘actually, we can set up
our own airline in Australia to fly our passengers around, we don’t
need to pay Jetstar, Virgin and Qantas, we can do it ourselves’,” he
says, pointing to no issues on foreign ownership and control. “ That
is potentially one of the biggest threats to Australian carriers in their
own market,” he warns. Polvnick predicts a Chinese travel or tour
operator would most likely make the move.
There is also potential in Australia for an “ultra, ultra LCC”, sug-
gests Peter Bellew, group chief executive officer, Malaysia Airlines.
The model — of “bare bones and charging for everything — works
everywhere, he says.
Full-service carriers in the region are making the most of their
position. Jetstar parent airline Qantas is capitalising on its strategic
location, which gives it exposure to the world’s largest and growing
tourism market of Asia, says Andrew Parker, Qantas group executive
for government, industry and international affairs. The 1.3 billion
passengers flying in Asia-Pacific this year are expected to grow to
2.9 billion by 2034. “ This region will be almost half the global market
and bigger than North America and Europe combined,” he says.
As a result, Qantas has rebalanced its global network towards
Asia over the last 10 years, with Asia today making up more than 50
percent of the Qantas group’s total international network compared
with 30 percent in 2007. “And we have more to come,” says Parker,
with Sydney-Osaka services to start in December, for example. In
▲ Air New Zealand has oriented its whole business around the
Pacific Rim since January 2013, chief executive officer Christopher
Luxon told delegates.
▲ Sydney Airport managing director and chief executive, Kerrie
Mather said his airport already serves 70 percent of the world’s
10/08/2017 4:54:48 PM
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