Australia has embraced long haul low cost operations with a network increasing to record numbers

Australia has been the testing ground for the long haul low cost model over the last decade and the market has benefited from a disproportionate amount of long haul low cost capacity. Australia still accounts for more than 20% of global long haul low cost capacity even though the sector continues to expand and make inroads in other regions such as Europe and the Americas.

For the first time the long haul low cost sector will surpass 500,000 weekly worldwide seats in 3Q2017. While this represents only a 0.5% share of total global seat capacity, the long haul low cost sector has been growing rapidly and should reach 1 million weekly seats by the end of 2019.

In Australia, long haul low cost operations now account for approximately 4% of total seat capacity, eight times the global average. When only counting the international market, the capacity share in Australia for the long haul low cost sector increases to approximately 10%.

The long haul low cost market in Australia continues to expand with another three new routes launching in the next few months. Australia will have 24 long haul low cost routes by the end of 3Q2017 and almost 110,000 weekly seats. This represents 15% of all of these types of routes globally and a 21% share of total long haul low cost capacity.

Long haul low cost carriers (LCC) ranked by weekly seat capacity and Australia’s share: Oct-2017

Notes:

  • *Jin Air operated a seasonal service to Cairns from Dec-2016 to Feb-2017 but the route is not currently operating.
  • LCC routes operated from Australia to Indonesia with narrowbody aircraft and Australia-New Zealand widebody LCC services (including AirAsia X’s Gold Coast-Auckland sector) not counted under long haul low cost routes or capacity.
  • Route total column accounts for the overlapping routes (Singapore-Melbourne and Toronto-London Gatwick) 
  • Based on schedules for week commencing 2-Oct-2017
 

Source: CAPA – Centre for Aviation & OAG

In 2013, when Australia had a majority of the world’s long haul low cost capacity, the market was much smaller and virtually entirely focused on Asia Pacific. At the time Jetstar was the second largest long haul LCC after AirAsia X, which counts Australia as its largest market.

Jetstar and AirAsia X were the pioneers in the current generation of long haul low cost, launching these services in 2006 and 2007 respectively. Gold Coast was AirAsia X’s first route and Australia has remained an important market, accounting for approximately 30% of AirAsia X’s capacity.

Scoot was still small back in 2013 – it later surpassed Jetstar to become the world’s second largest long haul LCC – and also has a large portion of its capacity allocated on Australia routes. Norwegian, which will soon surpass Scoot to become the second largest long haul LCC, and several smaller long haul low cost operators – including Air Canada rogue, Azul, Eurowings, Jin Air, NokScoot, Thai AirAsia X, WestJet and Wow Air, had not yet commenced long haul low cost operations in 2013. Several are also not based in Asia Pacific and therefore have virtually no possibility of a route to Australia.

Among the new crop of long haul LCCs only Jin, NokScoot and Thai AirAsia X are based in Asia. Jin briefly had seasonal service from Seoul to Cairns, operating a total of 16 return flights over an eight-week period from mid Dec-2016 to mid Feb-2017. Jin could potentially resume Cairns as a more regular service and could serve Melbourne as its full-service parent Korean Air currently only operates to Brisbane and Sydney.

NokScoot and Thai AirAsia X are at least for now entirely focused on the Thailand-North Asia market but could consider Australia routes in future. Jetstar is now the only long haul LCC offering nonstop flights in the Australia-Thailand market. AirAsia X and Scoot also carry significant Australia-Thailand traffic via their hubs in Kuala Lumpur and Singapore.

Australia has continued to grow in the long haul low cost segment over the last three years despite the faster long haul low cost growth in other markets. Cebu Pacific launched Manila-Sydney in Sep-2014 and Beijing Capital launched Qingdao-Melbourne in Sep-2016, providing the Australia market with two new long haul low cost competitors. Start-up Indonesia AirAsia X also launched services from Bali to Melbourne and Sydney in 2015 but both routes were dropped in 2016 as Indonesia AirAsia X suspended all scheduled operations. Indonesia AirAsia X could potentially resume scheduled flights and Australia routes in future.

Scoot also added Melbourne in late 2015, giving it four destinations in Australia. Melbourne-Singapore, which is also served by Jetstar, is now one of only two long haul low cost routes in the world with two competitors. The other is Toronto-London Gatwick, which is served by Air Canada rogue and WestJet.

Three new long haul low cost routes are being launched in the Australian market over the next few months – Sydney-Qingdao, Sydney-Ho Chi Minh and Melbourne-Ho Chi Minh. Beijing Capital is launching Sydney-Qingdao in Aug-2017 with two weekly flights while Jetstar is launching four weekly flights on Sydney-Ho Chi Minh and three weekly flights on Melbourne-Ho Chi Minh in May-2017.

As previously mentioned, the three new routes will grow the total number of long haul low cost routes in the Australian market to 24. This includes 14 routes from Jetstar, four each from AirAsia X and Scoot, two from Beijing Capital and one from Cebu Pacific (which adds up to 25 but as both Scoot and Jetstar operate Melbourne-Singapore the actual total is 24).

Of Jetstar’s 14 long haul routes, 10 routes focus mainly on Australian outbound leisure passengers (to Bali, Thailand, Hawaii and Vietnam). Its three Japan routes focus mainly on inbound Japanese visitors (to Carins and Gold Coast) and its Singapore route has a relatively even mix of inbound, outbound and transit traffic.

Jetstar’s long haul operation currently generates approximately 46,000 weekly seats, giving it a slightly more than 40% share of Australia’s long haul low cost market. Over the next few months Jetstar’s long haul capacity will increase very slightly, with some seasonal adjustments and the two new routes to Vietnam. While Jetstar is the world’s oldest long haul LCC currently operating, it has been relatively conservative in pursuing expansion, particularly after deciding in 2012 against implementing a plan to establish a long haul base in Asia.