Gulf carrier growth in Australia/NZ. Part 2: Qatar Airways becomes the growth engine

    Further Gulf-Australia/NZ growth hinges on Qatar Airways, and reactions to it. Qatar added more capacity to Australia/NZ in 2016 than Emirates or Etihad, and this appears likely to repeat in 2017. Shortly after Qatar Airways announced its intent to fly nonstop to Auckland, Emirates mounted a nonstop Auckland service in a month – a breathtaking speed that delivered a sharp message that it would defend one of its most important markets.

    Qatar’s high growth over 2016 and 2017 has resulted in its ANZ size in 2017 becoming 77% of the size of Etihad (and 31% the size of Emirates). Qatar has narrowed the gap: as recently as 2015 Qatar was only 37% the size of Etihad and 14% the size of Emirates.

    Emirates, Etihad and Qatar Airways annual additional seat capacity to Australia and New Zealand: 2007-2017

    qatar1

    Source: CAPA – Centre for Aviation, OAG

    Spontaneous growth from Qatar Airways could see a response from Emirates, but probably only in key markets. Emirates serves Auckland from three Australian cities, and that made Qatar’s proposition of a nonstop service an unacceptable competitive threat that Emirates had to match.

    Qatar’s further expansion depends largely on Australia expanding traffic rights to the main capital cities, which are capacity limited. Australia has only slowly been doing that – a situation that has pleased Qantas and Virgin, and by extension their partners Emirates and Etihad. If additional traffic rights were made available, Qatar Airways could be expected to take them up swiftly, launching its first service to Brisbane and then a second daily service to each of Melbourne and Sydney.

    Qatar is upgrading its single daily Melbourne and Sydney services from 777 to A380. This could further its argument with the Australian government that it is doing everything it can with existing entitlements: deploying its largest aircraft to Melbourne and Sydney and serving small cities not restricted in the bilateral. Qatar could argue that after maximising its existing frequency entitlements in Melbourne and Sydney by using the A380, it needs additional frequencies. By continuing to flying its own metal to smaller cities, such as Adelaide and Perth, it grows its brand recognition in those markets and reduces Qatar’s reliance on Qantas to feed its existing services out of Melbourne and Sydney.

    Emirates – Australia’s largest airline for westward travel

    Emirates has already overtaken Singapore Airlines as Australia’s largest foreign airline, and Emirates is the second largest airline in Australia’s international market. So far in 2017 Qantas will offer 65% more international seats from Australia than Emirates, but that includes the Australian flag carrier’s services to North America.

    10 largest airlines ranked on seat capacity between Australia and Asia/Middle East: 2017

    qatar2

    Source: CAPA – Centre for Aviation, OAG

    However, looking at the airlines flying from Australia to Asia and the Middle East (where there are connections to Europe from both regions), Emirates is 20% larger than Qantas.

    Outlook: Qatar’s ambition means growth, and competition, in Australia/New Zealand is set to remain.

    Globally, further growth from Qatar in key Australian cities should allow Qatar to balance its network, improving performance across its network. However, a stronger position may embolden Qatar to grow even further. Qatar suffers from the disadvantage that Australia’s two airline groups – Qantas and Virgin – partner with Qatar’s competitors, although Qatar is also a member of oneworld and therefore a partner of Qantas. However, in terms of those lucrative corporate contracts, Qatar still remains ‘out of the loop’ when compared to its Gulf rivals Emirates and Etihad given, those airlines close ties with Qantas and Virgin Australia respectively.

    The next 12-15 months will also see changes in the Australia/New Zealand long haul market looking westwards, as Qantas commences non-stop services to London from Perth on the 787-9, perhaps at the expense of one of the A380 services to London that operate via Dubai.  Qatar Airways shows no signs of pulling back its growth into the Australia / New Zealand region. And with Emirates continuing to protecting its ground, this will ensure competition amongst the ME3 is set to remain well into 2017, and a far cry of the early days of Gulf carriers in Australia.

    Meanwhile Chinese airlines are quickly catching onto the potential for Australia/NZ-Europe travel as they themselves wind up their capacity into the two countries. Next week the Blue Swan looks at how the Chinese airlines are growing and their likely impact on the Europe market.

    For Part 1 of this series, please see the link below:

    Gulf carrier growth in Australia/NZ. Part 1: 2017 to be the largest ever capacity increase