Transcript Maximising Non-Aeronautical Revenue

Overview of Recent Developments with the Trans-Tasman
Single Aviation Market
By Ian Thomas,
Managing Consultant, CAPA Consulting
May 26 2010
www.capaconsulting.net
International Conference on Air
Transport, Air Law and Regulation
1
SAM – a Chequered History
• Two “friendly” countries with mutual interests
• Natural extension of CER
• The roadmap under 1992 Australia-New Zealand MoU:
– Lifted capacity restrictions
– Double disapproval tariff regime
– Phased liberalisation to full market access by 1994
• Framed with best intentions, but other priorities intervened
• SAM delayed to 1996; full beyond rights added under “open
skies” agreement in 2000
• Where to now....a common border?
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Transport, Air Law and Regulation
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The Story of SAM over 10 Years:
+50% Seats; +65% flights
Trans Tasman Average Weekly Seat Capacity
2000-2010*
Trans Tasman Aircraft Movements
2000-2010*
900
800
700
600
160000
140000
120000
100000
500
400
300
80000
60000
200
40000
100
20000
0
0
* Source: SRS Analyser averaged for June and Dec to take into account seasonal variation
 Non-SAM Carriers
 SAM Carriers
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Competition & Service Development peaked
in 2003-04 with entry of LCCs
Number of Carriers & City Pairs on the Tasman 2000-2010*
30
25
Entry of Pacific
Blue, Freedom Air
and Emirates
20
Jetstar starts
operations
Non-SAM
15
SAM Carriers
City Pairs
10
5
0
5
6
6
8
2
2
2
2
2000
2001
2002
2003
7
6
5
4
5
5
2004
2005
2006
5
4
4
3
5
4
4
4
2007
2008
2009
2010
* Source: SRS Analyser averaged for June and December to take into account seasonal variation
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Evolution of Airline Market Shares - LCCs capture 22% of
Tasman Seats
Seat Capacity Share of SAM/Non-SAM carriers 2000-2010*
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
Qantas Capacity
Jetstar Capacity
Pacifc Blue Capacity
Air NZ Capacity
Freedom Capacity
Non SAM Capacity
2009
2010
* Source: SRS Analyser averaged for June and Dec to take into account seasonal variation
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Transport, Air Law and Regulation
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The Roadblock to Consolidation
• Logical progression towards trans-Tasman consolidation...or
is it?
• Qantas/Air New Zealand alliance bids twice hit competition
legislation barriers
• Seemingly similar legislative prerequisites on both sides of
the Tasman, different interpretation
• Concept of “public benefits” test critical to outcome
– Australia’s focus narrower; consumer welfare paramount
– New Zealand assessed consumer+producer interests
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Transport, Air Law and Regulation
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Qantas (submission to the Productivity Commission, August
2004):
“Such uncertainty and cost is not conducive to a productive,
dynamic single economic market....
The competition laws of Australia and New Zealand should
be integrated, so that identical laws apply in both countries.
In addition, it is critical that these laws are interpreted and
applied consistently.”
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Market Share Composition on the Tasman
today; 82% of seats held by SAM Carriers
Seat Capacity Shares by Airline
Year to June 2010
1.3%
2.2%
9.7%
34.2%
22.1%
Suspended Tasman
services
during 09-10
0.9%
13.2%
Source: SRS Analyser
16.4%
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The EU Model...not perfect but
consistent
• The general competition rules of the EU Treaty apply to
aviation on case-by-case basis
– Some forms of co-operation permitted
– Alliances approved if they do not eliminate competition
and consumer benefits shown
– Current alliances approved through individual exemptions,
but conditions applied (e.g. freeze on capacity,
relinquishing airport slots, and/or acceptance of interlining
with competitors)
• EU Treaty also addresses abuse of dominant market position
through e.g. predatory behaviour or some alliance
arrangements
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Transport, Air Law and Regulation
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Key Take-out for ASEAN
• Airline industry caught between apparently competing
objectives
• Uniform approach on competition law required to yield full
benefits of mutilateral liberalisation
• Australia-NZ Air Services Agreement provides for each
country’s laws to apply
• ASEAN also favours state-specific strategy under AEC
blueprint, developed under regional guidelines
• The Tasman experience emphasises the importance of
getting the detail aligned for real and effective
harmonisation of national policy
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Additional Slides
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Australia’s Liberalisation Progress – a Mixed Bag
Liberalisation Score Card
 Open skies, open capacity ASAs account for
50%+ of international passengers to/from
Australia;
 Open cargo arrangements in 32 ASAs;
 No multilateral agreements; may enter PIASA.
Negotiating
Open Skies
with EU
Open Capacity
with
Singapore
Open Skies
with US
Open Capacity
with UK
Accession to
PIASA under
consideration
Open Skies
with NZ
Single Aviation
Market
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Australia’s International Service Profile in FY09; dominated
by SE Asia and New Zealand
* Source: Bureau of Infrastructure, Transport and Regional Economics
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