Annual Reports

Annual Report 2015–2016

The Year in Review by the Chairperson, Dr Ian Douglas

This annual report marks the twenty-fourth year of operations of the International Air Services Commission (the Commission). It is my pleasure to provide an overview of the activities of the Commission for 2015–16, my first as Chairperson of the Commission. I joined the Commission in November 2012 and was appointed as Chair by the Governor-General in May this year.

This year saw the strongest profitability ever recorded for the global airline industry, driven mostly by low fuel prices and further consolidation by US carriers. Fuel is a major expense for airlines and accounts for on average 27% of an airline's cost.

In Australia, latest available annual figures show that international passenger movements into and out of the country increased by 6.4 per cent, while available seats increased by 4.7 per cent over last year. International flights during the year increased by 3.3 per cent and freight carried increased by 6.8 per cent. These figures indicate both a small increase in average aircraft size and a strengthening of load factors.

Over the last four years, we have seen an increase in capacity growth to Australia by the Gulf carriers. They accounted for 14.1 per cent of all seats operated to and from Australia in the latest year compared to 11.6 per cent four years ago. Their total operated seats increased over the previous year by 6.1 per cent. While both Etihad and Qatar Airways have increased frequency and capacity in the latest year, the capacity of the largest of the Gulf carriers, Emirates, remained stable with a total of 4.7 million seats to and from Australia. In March 2016, Qatar Airways commenced daily flights between Sydney and Doha in addition to its existing services between Doha and Melbourne and Perth. Subsequently, in May, Qatar launched services between Doha and Adelaide.

In terms of Uplift/Discharge, passenger traffic across the Tasman remains the largest market, accounting for 19 per cent of traffic in the latest year, followed by Singapore (14 per cent) and United Arab Emirates (10 per cent). Of the top 10 Uplift/Discharge countries, Japan recorded the highest growth in passenger numbers compared to the previous year, increasing by 26.8 per cent, but followed closely by China on 26.4 per cent.

In the latest year, Qantas Group (Qantas, Jetstar, Jetstar Asia) passenger numbers grew 10 per cent while Virgin Australia Group (Virgin Australia, Virgin Samoa, Tigerair Australia) passenger numbers decreased by 1.9 per cent. Qantas and Jetstar together continue to operate the largest number of seats into and out of Australia with a combined total of over 11.7 million seats (more than 25 per cent of all seats operated).

Qantas continued its partnership with Dubai-based Emirates Airline, and expanded its commercial relationships with China Eastern Airlines and American Airlines. Qantas returned to the Sydney-San Francisco route in December 2015 using a Boeing 747-400. It also resumed services between Perth and Singapore with a Boeing B737-800 and added capacity to Japan, shifting a daily Sydney–Tokyo Narita flight to Tokyo's Haneda Airport and launching a service from Brisbane to Tokyo–Narita. On 30 September 2015, Jetstar began twice weekly services to China, connecting Wuhan with the Gold Coast.

During the year, Virgin Australia refocused its international operations. It launched Tigerair Australia which commenced operations in March 2016 to Denpasar from Adelaide, Melbourne and Perth, replacing Virgin Australia services on these routes. Virgin Australia, however, continues to operate services to Denpasar from Sydney, Brisbane and Port Hedland. From October 2015, Virgin Australia increased its ‘Northern Winter’ scheduled capacity to New Zealand to an average of 83 weekly services from an average of 70 weekly services in the previous year . In January 2016, Virgin Australia withdrew services to Thailand and returned its capacity allocation on the route.

On 31 May 2016, Virgin Australia released a statement to the Australian Securities Exchange announcing it had formed a commercial alliance with HNA Aviation Group which was issued new shares equivalent to approximately 13% of the shares in the Virgin Australia Group. This was followed by Virgin Australia's application for a capacity allocation of 1,925 seats per week on the China route, and seven frequencies per week on the Hong Kong route. Virgin Australia intends to commence operations on these routes from 1 June 2017. Both applications were granted by the Commission.

In its decisions granting the capacity allocations to Virgin Australia on the China and Hong Kong routes, the Commission considered that Virgin Australia's proposed services on the Australia-Beijing and Australia-Hong Kong routes would provide more options to Australian travellers and promote further competition on these routes.

China is now Australia's third largest country for Origin/Destination passenger traffic with a 9.2 per cent share. Only the United States with 9.3 per cent and New Zealand with 14.7 per cent are larger. Passenger traffic between Australia and China has recorded an average annual growth rate of 12.4 per cent over the last five years and an increase in the latest year of 17.7 per cent. The Hong Kong Origin/Destination market is ranked eleventh in terms of passenger traffic. Passenger traffic between Australia and Hong Kong has recorded an average annual growth rate of 4.1 per cent over the last five years and an increase in the latest year of 6.8 per cent. Only Cathay Pacific and Qantas currently operate non-stop services between Australia and Hong Kong.

In relation to all-cargo services, during the year Pacific Air Express continued to operate one weekly service utilising its 17.5 tonnes of freight capacity between Brisbane and Honiara (Vanuatu) and two weekly services between Brisbane and Port Moresby (Papua New Guinea). Finally, Tasman Cargo continued to operate freight services between Sydney and Auckland.

Since the Commission started the process of encouraging airlines to consolidate multiple determinations two years ago, we have seen airlines (Qantas, in particular) consolidating their multiple determinations on various routes. This approach has considerably streamlined the regulatory process which means the airlines will have to make fewer applications for renewal of determinations. This year, Qantas consolidated its determinations on five routes (Chile, China, Hong Kong, New Caledonia and the Philippines).

As in previous years, applications by Australian airlines to use capacity in joint services or code share arrangements with other carriers generated significant work for the Commission. With both Qantas and Virgin Australia increasing codeshare partnerships and using commercial agreements to expand their networks, the Commission is required to monitor the utilisation of allocated codeshare capacity in the same way that it monitors the utilisation of capacity allocated for the carriers' own operations.

The Commission operates with a very small Secretariat. The Executive Director Marlene Tucker has secured resources from the Department of Infrastructure and Regional Development to deliver the work of the Commission in an efficient and timely manner. Her efforts are greatly appreciated. I would also like to say a special thanks to my fellow Commissioner, Mr John King, whose expertise and experience has contributed substantially to the work of the Commission.

Dr Ian Douglas

PDF Version

The Commission's Annual Report is available in PDF format for easy download and printing. The Annual Report is also available in hard copy by contacting the office, the details can be found under the “Other Information” tab on this website. The document reflects the information in the hardcopy of the annual report tabled in Parliament on 13 September 2016.

 Previous IASC Annual Reports


Last Updated: 13 September, 2016