A Galaxy Far, Far Away: Australia isn’t close to much. But Sydney, for one, is booming with inbound tourists

Feb 29If you’re on your way to Sydney from abroad, you’re probably in a longhaul widebody aircraft. Because unless you’re coming from New Zealand, Indonesia, Papua New Guinea or an island in the South Pacific, Australia’s largest city is a long, long way away.

It’s distance—perhaps more than anything—that shapes Australia’s international airline market, which lies a world away from most of the earth’s major economic and population centers. But good news for Sydney: The world is shrinking, thanks to new-generation longhaul airplanes that make flying to distant places far more economical than in the past. Add to this the new reality of cheap fuel, which helps longhaul airlines disproportionately, and it’s no wonder that Sydney’s airline market is flourishing.

Last year, sure enough, was a record year for Kingsford Smith Airport, Sydney’s only major airport with scheduled air service. It welcomed 40m passengers, roughly equal to the number handled by Toronto’s main airport last year, and grew about 3% from 2014’s levels. Growth was a bit higher for international travel—up 4% y/y—and gained momentum as the year progressed, with international traffic volumes up 7% in the final quarter of the year. And that’s despite large capacity reductions by Malaysia Airlines and AirAsia X from Kuala Lumpur, as well as the outright suspension of Sydney flights by two airlines: Virgin Atlantic and Aerolineas Argentinas. This year is off to an even better start, with total airport traffic up 8% in January, including 10% growth for international travel.

January volumes were, to be sure, boosted by the earlier occurrence of Lunar New Year in 2016, which resulted in a 39% y/y surge in Chinese passengers using Sydney’s airport. But a surge in Chinese passengers isn’t only a calendar quirk. On the contrary, huge growth in Chinese nationals flying to Sydney was a major trend throughout all of 2015, rising 18% for the year. China might no longer need as many of Australia’s minerals for its slowing economy, but it’s slowing economy hasn’t stopped it—at least not so far—from sending more and more tourists.

Chinese airlines, inward looking even throughout their economy’s boom years, are now expanding intercontinentally…

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