Qantas slims kangaroo route to serve Asia

Major carriers are working on plans to ramp up their Asian strategies to capitalise on the burgeoning middle class.

Qantas capacity to Asia will be 40 per cent next year, up from 30 per cent in 2012. Picture: Craig Wilson

Major carriers are working on plans to ramp up their Asian strategies to capitalise on the burgeoning middle class, but yields face pressure as new
long-haul low-cost carriers enter the market.

Qantas Airways, which has already increased capacity to high-growth markets in Asia, is planning to deploy 40 per cent of its capacity to Asia in the 2018 financial year, up from 30 per cent in 2012.

The national carrier is cutting the share of capacity across the kangaroo route between Australia and London from 28 per cent to 13 per cent over the same time amid sluggish growth and fierce competition.

For the Qantas Group — which also includes offshoot Jetstar Group and its Asian ventures — Asia will make up 55 per cent of capacity, making it the biggest international market for airline capacity.

Qantas chief executive of international and freight, Gareth Evans told Friday’s investor day that the decision to use the Boeing 787-9 Dreamliner on the new Perth-London flight would free up two A380s “for us to deploy into the fast-growing Asian markets and really will enable us to shape the schedules in Asia”.

“We’ve not announced where we’re flying those A380s because they will actually move around the region,’’ Mr Evans told investors.

“They will fly them heavily in the peaks, so we’ve got lots of seats when the demand is there, and we will basically move them around in the troughs.’’

Virgin Australia plans to launch direct flights to Hong Kong and could be flying
to mainland China later this year.

Virgin has been granted interim authorisation by the competition regulator for a codeshare deal with China-based HNA Group including Hong Kong Airlines and Hong Kong Express Airways.

A Virgin spokeswoman said: “Virgin Australia’s entry into Hong Kong and greater China is a key pillar of our international strategy and will allow us to accelerate our access to Australia’s fastest growing and most valuable inbound travel market.’’

In December, China and Australia announced an open skies agreement, which is expected to spur a massive surge in traffic between the two nations.

Centre for Aviation executive chairman Peter Harbison said the Asia-Pacific market was “going to be where the main traffic growth is for the next decade, at least” and while China was the leader due to its “massive scale, several other Asian countries will blossom in coming years”.

“As Australia’s economy shifts towards much greater reliance on Asian trade, air services are intertwined in that evolution,” he said. “For Qantas and Virgin alike, partners in the Asian market will be even more important than elsewhere.”

But Mr Harbison said the issue of yields would remain a challenge, especially as more long-haul low-cost new carriers enter the market. “For the time being, these markets are typically very competitive and often low yielding, both because of the ubiquitous sixth freedom connections and because the new breed of Asian traveller is extremely price sensitive,” he said.