Qantas Airways, Australia’s once struggling national airline group that just reported a turn-around last month, expects to benefit from the rise of Chinese carriers ferrying passengers to and from Southern China.
China Southern and China Eastern Airlines are expanding their service offerings, representing a significant capacity expansion for the two biggest operators on the popular China to Australia market.
“We think it is helping,”Qantas chief executive Alan Joyce said in an interview with the South China Morning Post.
“When China Southern brings people to Australia, if they take two to three domestic flights, that is good for us, because we have that width of the domestic network: we have 63 per cent of the domestic capacity.”
Speaking in Hong Kong nine months after Qantas’s plan to set up budget carrier Jetstar Hong Kong in the city was thwarted, Joyce says he has accepted the outcome and “moved on.”
He says the collapse of Jetstar Hong Kong after oppositions from local airlines led by Cathay Pacific Airways had not strained the relation between the two long-time rivals.
“That was disappointing. But the way we look at it is it was a Hong Kong authority decision,” Joyce said.
He added that Qantas has no plans to deepen its relation with Cathay beyond being members of the Oneworld alliance.
In order to garner a bigger share of the Chinese outbound tourist market, Joyce’s strategy for Qantas - which only flies to Shanghai and Hong Kong at the moment - is to court the Chinese carriers and play a delicate act of balance between friends and foe.
Qantas is in a unique position as it maintains codeshare partnerships with China Eastern and China Southern - both members of Oneworld’s competitor alliance Skyteam, as well as an interline agreement with Air China, a Star Alliance member.
According to the Centre for Aviation, Qantas has approximately 28 per cent of the passenger capacity between Australia and Hong Kong, and 6 per cent between Australia and mainland China.
Centre for Aviation senior analyst Will Horton said Qanta’s share of the Australia to mainland China market “has declined in recent years and will likely continue to do so.”
“We will grow with codeshare,” Joyce said. “[The Chinese partners] have huge distribution in China and network which we would like to tap into,” Joyce said.
“We would like Qantas to serve the business market where there is a big outbound market as well as an inbound market, and the big business markets are Hong Kong and Shanghai - maybe Beijing in the future. We don’t want to service every city. We will use partners to go to the rest of these cities.”
Joyce said its joint venture partnership with China Eastern, approved in August, will complement its partnerships with Emirates and American Airlines as its three most important globally.
“We will share profitability and revenue. We have just moved into Terminal 1, that is China Eastern’s terminal in Shanghai, and we are working together on aligning on products, schedule and pricing, and selling each others’ tickets,” Joyce said.
“With all the traffic growth in China, China Eastern has the potential to be our biggest codeshare partner in a decade,” he said.
The total number of Chinese tourist arrivals in Australia surpassed 1 million in 2015, though that represents only 1 per cent of the growing number of outbound trips made by the Chinese. These figures are forecast to quadruple within the decade.
“If we just keep the 1 per cent, that 1 million becomes 4 million over time, so the potential is massive,” Joyce said.
The Centre for Aviation’s Horton said Qantas is at a disadvantage when it comes direct competition with Chinese airlines, which have a lower cost base and the origin of the traffic is heavily imbalanced. “Qantas is under no false pretension the China-Australia market is for its taking,” Horton said. “It receives indirect benefits from the influx of foreign visitors taking domestic flights in Australia, which could be more profitable than China-Australia flying,” he said.
Joyce said the company is also looking to grow the China market through chartered flights, after Dalian Wanda group last year hired planes from Jetstar to operate packaged tours to the Goldcoast. “We are gonna do more of that,” he said.