Wednesday, 15 April 2015

QANTAS and China Eastern Alliance Receives Australian Government Support

The federal government’s Department of Infrastructure and Regional Development has called on Australia’s competition regulator to reverse course and give Qantas’s proposed alliance with China Eastern the green light.

In March, the Australian Competition and Consumer Commission (ACCC) said it a draft determination it intended to knock back the tie-up, arguing the partnership would give Qantas and China Eastern “an increased ability and incentive to limit capacity and/or increase airfares” on the Sydney-Shanghai route.

However, the Department of Infrastructure and Regional Development said in a submission to the ACCC following the draft ruling, the proposed agreement was “positive for the Australian economy and is consistent with the Australian Government’s aviation policy settings”.

“The department sees no reason to deny the proposed coordination agreement,” the general manager for the Department’s aviation industry policy branch Stephen Borthwick said in the submission dated April 8.

“The benefits that will flow to Australia’s aviation industry, Australian consumers, the Australian tourism industry, and the Australian economy as a whole are exactly the benefits the Australian Government’s aviation policy is designed to support.”

In its draft determination, the ACCC expressed concerns that Qantas and China Eastern combined currently operated about 83 per cent of all seats between Sydney and Shanghai.

While Air China also flew between Sydney and Shanghai with a three times a week service, the ACCC said it did not believe the Star Alliance member would be an effective competitor against a combined China Eastern-Qantas entity and noted it had reduced its presence on the route over the past five years.

“The ACCC does not consider that Air China will sufficiently constrain Qantas and China Eastern in the event they decide to reduce or limit growth in capacity to increase airfares if the Proposed Conduct is authorised,” the ACCC said in its draft determination.

“The ACCC considers that the lessening of competition on this route that will arise as a result of the Proposed Conduct is likely to outweigh any of the public benefits likely to arise.”

In response, the Department said the ACCC’s draft ruling was “too narrowly focused on the Sydney-Shanghai route rather than the operations of the wider Australia-China market.”

It argued it was a “commercial reality” that in any given market a hub airline would have a significant market share on routes to or from that hub.

“This should not in itself prevent the formation of immunised alliances with the other carriers when consumer benefits can be showed to outweigh competitive impacts,” the Department’s submission said.

“The department also contends the ACCC has overstated the impacts on the Sydney-Shanghai route, particularly when considered in the context of the existing competition on the route and the availability of one-stop services in the broader Australia-China market.”

Meanwhile, the National Tourism Alliance argued in its post-draft determination submission the alliance would allow both Australian and Chinese markets to “better and more efficiently serve secondary cities in China through a domestic Chinese hub”.

“The draft determination constrains the ability of Australian airlines to develop a strategic hub in China,” the Alliance’s April 8 submission said.

“The Australia-China market is highly competitive in terms of both direct traffic and indirect options through other Asian hub cities.

“We are concerned that the draft determination cements a competitive advantage for other carriers and these hubs, through the existing liberal air services agreements that China has with them, in addition to the arrangements that Australia has with these third countries.”

Qantas planned to relocate its operations Shanghai Pudong Airport to Terminal One, which is where China Eastern is based, as part of the alliance to improve transit times and share facilities, among other benefits.

Sunday, 28 December 2014

Air Asia Flight Missing

A search is underway for an AirAsia plane carrying 162 people, that has gone missing in bad weather en route from Indonesia to Singapore in the third crisis for a Malaysian carrier this year.

Air traffic controllers lost contact with the Airbus A320-200 about an hour after it left Juanda international airport in Surabaya, east Java, at 5.20am local time.

It was scheduled to arrive in Singapore at 8.30am.

Shortly before disappearing, the plane asked permission from Jakarta air traffic control to track away from its flight plan and climb above adverse weather in an area renowned for severe thunderstorms.

The pilots requested "deviation due to en route weather before communication with the aircraft was lost while it was still under the control of the Indonesian Air Traffic Control (ATC)", AirAsia said in a statement on its Facebook page.

The airline said 156 of those on board Flight QZ8501 were Indonesians, with three South Koreans and one person each from Singapore, Malaysia and France also missing.

On board were 138 adult passengers, 16 children and an infant, in addition to the two pilots and five cabin crew.

The Indonesian air force said two of its planes had been dispatched to scour an area of the Java Sea, southwest of Pangkalan Bun in Kalimantan province.

"The weather is cloudy and the area is surrounded by sea. We are still on our way so we won't make an assumption on what happened to the plane," said Indonesian air force spokesman Hadi Cahyanto.

The aircraft was operated by AirAsia Indonesia, a unit of Malaysian-based AirAsia which dominates Southeast Asia's booming low-cost airline market.

With hard details few and far between, panicked relatives gathered at Singapore's Changi airport.

Meanwhile, hundreds of Indonesians descended on the Surabaya terminal hoping for news of the missing jet.

A 45-year-old woman told AFP that she had six family members on the plane.

"They were going to Singapore for a holiday," she said.

"They have always flown with AirAsia and there was no problem. I am shocked to hear the news, and I am very worried that the plane might have crashed."

Indonesia, a vast archipelago with poor land transport infrastructure, has seen an explosive growth of low-cost air travel over recent years.

But the air industry has been blighted by poor safety standards in an area that also experiences extreme weather.

AirAsia said the missing jet last underwent maintenance on November 16.

An official from Indonesia's transport ministry said the pilot asked to ascend 6000 feet to 38,000 feet to avoid heavy clouds.

"The plane is in good condition but the weather is not so good," Djoko Murjatmodjo told a press conference at Jakarta's airport, addressing reports of severe storms in the area where the jet went missing.

Murjatmodjo said search efforts were being focused on an area between Belitung island and Kalimantan, on the western side of the island of Borneo, about halfway along the flight's expected route.

The plane's disappearance comes at the end of a disastrous year for Malaysian aviation.

Malaysia Airlines Flight MH370, carrying 239 people, vanished in March after inexplicably diverting from its Kuala Lumpur-Beijing course. No trace of the aircraft has been found.

Just months later another Malaysia Airlines plane went down in July in rebellion-torn eastern Ukraine - believed to have been hit by a surface-to-air missile - killing all 298 aboard.

AirAsia's flamboyant boss Tony Fernandes, a former record industry executive who acquired the then-failing airline in 2001, tweeted: "Thank you for all your thoughts and prayers. We must stay strong."

The co-pilot of the missing plane is a French citizen, an official said.

Indonesian Transportation Ministry spokesman JA Barata named the co-pilot as Remi Emmanuel Plesel.

Friday, 12 December 2014

Ticket Prices To Fall In 2015 Amid Lower Fuel Costs

Air travel looks set to be more affordable in 2015 as the recent fall in fuel prices leads to lower ticket prices, the International Air Transport Association (IATA) says.

IATA’s Global Economic Outlook report, released on Wednesday, says average return air fares, which exclude surcharges and taxes, are tipped to fall by 5.1 per cent to US$458 in 2015, after adjusting for inflation.

IATA chief economist Brian Pearce says lower fuel prices are “unambiguously good” for the travelling public.

“There is going to be a major benefit for consumers,” Pearce told reporters at IATA’s media day in Geneva on Wednesday.

However, Pearce cautioned that the recent reduction in the price of fuel may take some time to flow through to airfares given the hedging contracts in place at many carriers.

But history showed that airfares and cargo rates “ultimately reflected the cost of providing those services”, Pearce said.

“It is a very competitive market, airlines compete on the total travel cost to passengers so you should expect that total travel cost including surcharges to come down in line with what we are saying here about the underlying fare,” Pearce said.

Oil prices have fallen about 40 per cent since June, and were sitting at close to five-year lows at about $US66 per barrel. But despite the recent slide, both Australia’s two major carriers Qantas and Virgin Australia had no plans to reduce their fuel surcharges on ticket prices for certain international destinations.

Qantas chief executive Alan Joyce told reporters on Monday the airline needed to see a sustained level of lower fuel costs before it would consider changes to its fuel surcharge.

“We are long way away from seeing sustainable fuel price reductions that would allow us to start alleviating and pulling back on the surcharges,” Joyce said.

Virgin chief executive John Borghetti said on November 19 it was “a little bit early for people to jump to conclusions that the world has changed dramatically on fuel”.

IATA chief executive Tony Tyler said fuel surcharges imposed by airlines often did not cover the full impact of any increases in the cost of fuel.

“The mechanism of the fuel surcharge has been an effective one for the airlines obviously to help cover the increase in fuel cost although it hasn’t by any means covered all of it,” Tyler said.

“But also, it does make fares flexible to costs in the relatively short term.”

IATA said passenger traffic was expected to increase seven per cent in 2015, above the 5.5 per cent trend growth rate of the past two decades. Meanwhile, capacity was forecast to rise an even higher 7.3 per cent in 2015.

The rise in air travel was reflected in the number of city-pair connections rising above 16,000 for the first time in 2014, having nearly doubled over the previous 10 years.

IATA, which represents the world’s airlines, has about 250 carriers as members covering about 84 per cent of global air traffic.