Never mind their remote geographies, highish labor costs and turbulent airline histories. Today, Australia and New Zealand are both great places to run an airline. One big reason: strong demand for flights between the two nations.
The trans-Tasman market connecting Australia with New Zealand happens to be one of the most competitive markets in the world. Currently, eight different airlines serve it, five of them based outside the region, exercising liberal fifth-freedom rights. For context, a flight between Sydney and Auckland, the busiest trans-Tasman route, is roughly the same distance as a New York-Dallas or Paris-Athens flight.
In the 12 months to August 2018, according to Australian government data, 7.1m passengers flew between Australia and New Zealand. That was up just 1% from the same period a year earlier, and just 3% from two years earlier. Sounds like a sleepy story. Yet it’s anything but.
The sluggish traffic growth belies a surge in major market developments, including much faster growth among just the Big Three players in the market. Who are the players in the market? Start with the five outsiders: Emirates, LATAM, Taiwan’s China Airlines, Singapore Airlines and AirAsia X. All operate trans-Tasman flights as extensions of service to either Australia or New Zealand. LATAM, for example, flies from Santiago to Melbourne and then onward to Auckland. Philippine Airlines and Aerolineas Argentinas once had similar trans-Tasman tag flights.
The key story regarding the trans-Tasman outsiders is their diminishing presence. AirAsia X, for one, will exit the market entirely with the suspension of its Gold Coast-Auckland flights in February. Much more significantly, Emirates exited the Auckland-Melbourne and Auckland-Brisbane routes earlier this year, leaving it with just one trans-Tasman route: Auckland-Sydney—it served all three routes with giant A380s. LATAM still serves Auckland-Sydney. China Airlines still serves Auckland-Brisbane. And Singapore Airlines now serves Wellington-Melbourne, having shifted from Wellington-Canberra. But with the big Emirates cuts, plus AirAsia X’s looming exit, trans-Tasman seat capacity by the five outsiders will be down 44% y/y next quarter, according to an Airline Weekly analysis of Diio Mi schedule…
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