Qantas has announced that it will introduce flights from Perth Airport (PER) to Paris Charles de Gaulles (CDG) just in time for the Olympic Games next year. The oneworld Alliance member is going to inaugurate the service on 12 July 2024 and will operate it with a 4/7 frequency during the Olympics and peak tourist season in Europe. From mid-August the frequency will be reduced to  three flights per week.

This adds another destination to Qantas’ existing European network, that currently comprises London Heathrow (LHR) and Rome Fiumicino (FCO). Since the PER-CDG service will continue after the Olympic Games, the decision in favor of Paris must be a strategic one. Naturally, we’re curious which additional factors, apart from the USP “Olympic Games”, have led to the decision in favor of Paris and against other European hubs such as Frankfurt Airport (FRA), Zurich Airport (ZRH) or Amsterdam Airport Schiphol (AMS), which are all still missing in the Qantas network.

Status Quo & pre-COVID comparison:

The table shows the Top 10 passenger potential (based on Sabre GDD, one-way) from PER to Europe in the period 11/22-10/23. Applying the elimination method, the decision in favor of CDG is obvious: apart from LHR, which is already served, only Manchester Airport (MAN) and Dublin Airport (DUB) have a larger potential than CDG. However, both are already perfectly connected via LHR, especially since British Airways, a Oneworld alliance partner, operates out of LHR. The remaining competitors are clearly falling behind CDG.

Hubs of other Oneworld carriers (Madrid, Helsinki) do not appear in the top 10. In addition, the transfer share (beyond traffic) is negligible at 7%, even in the case of LHR as a Oneworld hub.

The table above also shows that, when comparing our top 10 in terms of current and pre-COVID levels, only CDG has already returned to pre-COVID demand, which indicates increased popularity. In contrast, some of CDG’s competitors still lag significantly behind pre-COVID levels; for instance, AMS has only achieved two-thirds of its pre-COVID demand so far.

Consideration of behind traffic & pre-COVID comparison

As mentioned earlier, beyond traffic only plays a minor role, at least for Qantas’ existing European connections. A different picture, however, appears when looking at the behind traffic (i.e. feeder traffic): in the passenger mix of PER-LHR the behind traffic makes up 58% of the total traffic, in the passenger mix of PER-FCO even 73%. When examining the O&D potential of Australia’s two busiest airports, namely Sydney Airport (SYD) and Melbourne Airport (MEL) (both potential behind airports of PER in terms of flight progression), a distinct overview emerges, as illustrated in the table below:

Apart from LHR, CDG has by far the largest O&D potential. If we again compare the current potential with the pre-COVID potential, CDG shows a recovery that is at least as strong as that of its competitors.

The analysis shows that the Olympic Games are not the only argument in favor of starting a connection from PER to Paris. Growing their European footprint, Qantas has undoubtedly made the right choice by favoring Paris over other destinations.

Bamboo Airways, with initial ambitious expansion plans, has now announced to focus on significantly improving its commercial efficiency. This includes discontinuing all of its long-haul routes and making corresponding adjustments to its fleet structure.

In the following, we will conduct a thorough analysis of all suspended international long-haul flights from Bamboo Airways to Europe (LGW, FRA), Australia (MEL, SYD), as well as Southeast Asia, including Seoul (ICN), Tokyo Narita (NRT), Singapore (SIN), and Taipei (TPE); in particular, we will compare the performance of the airline’s individual international routes with those of its direct competitors in the respective markets. 

Network – before and after:

Before taking a deep dive into these international routes here’s an overview of Bamboo Airways’ route network before and after the announced restructuring. 

Bamboo Airways route network before the announced restructuring: 

Bamboo Airways’ downsized route network: 

Out of the 14 international routes Bamboo Airways once operated, all are now no longer available, as in their website no longer displays any flights for these services.

To obtain a more comprehensive insight into Bamboo Airways’ performance on the aforementioned suspended international routes, we have compared its achieved RASK, passenger load factors, and offered capacities with those of the other two major airlines in Vietnam, Vietnam Airlines, the state-owned full-service carrier, and VietJet Air, an ultra-low-cost carrier. The data for this comparison is drawn from the BEONTRA Market Insights Reports, spanning the last 12 months of available data (September 2022 – August 2023). 

One can easily observe that Bamboo Airways’ RASK on their suspended international routes is consistently lower than that of its direct competitors, Vietnam Airlines and VietJet. The only exception is VietJet’s routes from Ho Chi Minh City to Down Under (i.e., MEL and SYD) where the ultra-low-cost airline managed to seize a larger slice of the market by employing an aggressive pricing strategy, e.g., offering thousands of tickets for 0$ (excluding charges).

Upon closer examination of the overall achieved RASK out of Ho Chi Minh City and Hanoi, it becomes apparent that Bamboo Airways’ suspended international routes have consistently underperformed compared to its network’s profitability average:

Furthermore, Bamboo Airways has been unable to achieve a RASK as high as the one of Vietnam Airlines, or even VietJet when departing from SGN. While Bamboo Airways managed to maintain relatively decent load factors, they often remained on the lower end, particularly for their long-haul international routes to Frankfurt (from SGN & HAN), Bangkok BKK (from SGN), and Tokyo Narita (from HAN) – which were among the lowest compared to its direct competitors in the respective markets.

Competitive Situation:

Bamboo Airways, positioning itself as a hybrid airline, faces strong competition on two fronts out of his home market. As mentioned, on one side, it contends with Vietnam Airlines, the country’s largest state-backed full-service network carrier, and on the other side, Bamboo Airways competes against VietJet, the assertive ultra-low-cost carrier that has been rapidly expanding its market presence.

Beyond that, Bamboo Airways has faced competition from at least one other carrier on the majority of its international routes. In recent months, the competition has further intensified, driven by increased demand, especially on routes connecting Vietnam and Australia. In April 2023, VietJet introduced non-stop flights from Ho Chi Minh City to Melbourne and Sydney, quickly gaining considerable market shares. It has further announced plans to expand its international network even more, offering services to Adelaide, Brisbane, and Perth. In addition, Vietnam Airlines expanded its network as well by launching a new non-stop service from Hanoi to Melbourne in June 2023, swiftly surpassing Bamboo Airways in terms of monthly passenger numbers, beginning as early as July.

Conclusion:

The analysis has shown that the need to significantly enhance its commercial efficiency by discontinuing all of its long-haul routes and concentrating on high-demand domestic and tourist routes using a more uniform narrow-body fleet appeared to be the only viable path forward. It will be interesting to discover to what extend Bamboo Airways can successfully execute this necessary turnaround with its new strategy in the coming weeks and months, especially in light of the intensifying competition within the fiercely competitive Vietnamese and Southeast Asian market. According to recent press releases, the Vietnamese tax authority has meanwhile also frozen accounts of Bamboo Airways due to tax debts in the millions. This is certainly not a positive sign.

While air travel edges closer to its pre-pandemic heights in many parts the world, the aviation industry is far from returning to the same old routine. Our latest analysis reveals not only a diverse recovery pace among airlines, but also a substantial uptick in operational costs. Understanding the implications of these shifts and their impact on airports’ business strategies becomes essential.

In a landscape where precise route costs remain closely guarded secrets, we turned to the widely accepted Cost per Available Seat Kilometer (CASK) – a metric derived from airlines’ financial reports. It is calculated by taking an airline’s operating expenses and dividing it by the total number of available seat kilometers produced.

For this analysis, we set the focus on the cost dynamics in Europe and North America. Leveraging data from BEONTRA’s Route Forecasting solution, our exploration delved into the relative changes in CASK between 2019 and 2022. The following graphs illustrate a marked surge in operating costs across all airlines examined, ranging from 7% to 37% in Europe and 21% to 46% in North America. The average escalation stood at 21% in Europe and a striking 30% in North America.

Interestingly, European giants like Lufthansa and British Airways faced significant increases of 36% and 37% respectively in operating costs. Notably, their capacity measured in Available Seat Kilometers (ASK) was 27% and 30% lower in 2022 compared to 2019. However, the lag in recovery compared to other airlines cannot solely explain the cost spike.

Airlines with impressive capacity growth exceeding pre-pandemic levels, like Wizz Air in Europe and Spirit Airlines in North America, also faced excessively higher operating costs compared to the 2019 level. Given their ultra-low-cost carrier status, it’s reasonable to infer that soaring fuel prices played a significant role. The staggering 80% surge in jet fuel costs between 2019 and 2022 likely played a substantial part in this cost escalation.

Further details on the reasons behind the changes are beyond the scope of this article. But our analysis illuminates that the post-pandemic operating cost landscape has fundamentally shifted. With operating costs increasing by around 21% in Europe and 30% in North America, business development teams at airports should not only focus on the recovery of market volume, but also closely monitor the balance of load factors, fares and operating costs of their airline customers’ route networks – now more than ever.

The announcement of Turkish Airlines’ new flight between Istanbul (IST) and Detroit (DTW) starting November 15, 2023, encouraged us to have a closer look at the expected connectivity and impact for passengers traveling between the two cities and beyond. The flight will initially operate on Mondays, Wednesdays, and Fridays, with additional flights on Saturdays starting in late December 2023. The flight schedule is as follows:

IST-DTW: departure 15:45, arrival 18:50

DTW-IST: departure 21:35, arrival 15:35 (+1)

Turkish Airlines will use a Boeing 787-900 on that route, equipped with 30 seats in business class and 270 seats in economy class.

Since DTW is a hub for SkyTeam carrier Delta Air Lines, no significant behind traffic can be expected. The focus therefore seems to be on business-dominated point-to-point and transfer traffic in Istanbul, with VFR traffic likely to play a dominant role.

Even though Royal Jordanian already serves the target region with 4 weekly flights, connectivity will be significantly improved especially to the African and Indian subcontinent, in addition to the Middle East, due to the enhanced TK network.

In the following, we would like to look at how successful Istanbul Airport is able to connect passengers originating from Detroit to the ten most important markets in the Middle East, Africa, and the Indian subcontinent, in terms of passenger volume. The table above shows the result.

Except for Dhaka with its arrival and departure time in the very early morning hours, all destinations can be reached both inbound and outbound, and on all flight days. However, Amman, Delhi, Mumbai, Baghdad, and Jeddah show quite long connecting times, so passengers would have to be somewhat patient connecting into those markets.

 America’s car industry capital becomes Turkish Airline’s 13th destination in the US. Considering this, the integration of Detroit into the network of the airline, which continues to expand rapidly, is certainly a no-brainer. The simultaneous addition of Detroit and Denver – the latter a hub of Star Alliance partner United Airlines – to Turkish Airlines’ route network will significantly improve connectivity for travelers from the Midwest to the Middle East and the African and Indian subcontinent.

As the global aviation industry evolves, airlines are constantly seeking new opportunities to expand their networks and meet the growing demand. In our previous article Sleeping Giants: Untapped Aviation Markets with the Potential for a Reawakening, we analyzed the top 10 untapped aviation markets worldwide. This time, we will take a closer look at the Asian aviation market, specifically focusing on routes in Asia that have not yet been considered for direct services by airlines, despite having proven to attract a considerable number of passengers before the COVID-19 pandemic started in 2019.

Using origin-destination demand data from the BEONTRA Route Forecasting solution, we have compiled a table summarizing the top 10 untapped Asian aviation markets based on passenger volume in the past 12 months (June 2022 – May 2023).

In the following, we will focus on summarizing the notable trends we identified:

Los Angeles to Ho Chi Minh City leading the ranking: The route from Los Angeles (LAX) to Ho Chi Minh City (SGN) stands out as the top contender in our ranking, with 253,000 passengers (bi-directional) in the past 12 months. This represents a remarkable recovery rate of 95% compared to 2019 levels. While this route holds tremendous potential for a launch of a direct service, serving it poses unique challenges due to its substantial flight distance of approximately 13,200 km. If introduced, it would easily become one of the longest flight routes operated by airlines worldwide. Thus, it remains to be seen which airline will take up this challenge and tap into this promising market.

Huge potential for direct services to Bali, Indonesia: One striking observation from the ranking is the presence of Denpasar (DPS) in Bali in Indonesia, appearing five times. This indicates the significant untapped potential for introducing direct services to this popular destination. There is potential for direct flights from the Indian market, with major airports like New Delhi (DEL) and Mumbai (BOM), as well as from Europe, with London and Paris being the largest metropolitan regions and their respective hubs, Heathrow (LHR) and Paris Charles de Gaulle (CDG). Furthermore, there is also potential for a domestic direct service from Medan (KNO). It’s worth noting that the recovery rates for routes from New Delhi (DEL) and Mumbai (BOM) to Denpasar (DPS) have already surpassed 2019 levels, with recovery rates of 145% and 130% respectively.

Lagging domestic routes in Asia: Upon closer examination of the current recovery rates for the top 10 untapped Asian routes, it becomes apparent that domestic routes in Japan, but also Indonesia and China, are lagging behind. Their recovery rates are still way below 50%, whereas all international routes in the ranking have already recovered at least by 50%.

 An example of this is the domestic route from Kagoshima (KOJ) to Sapporo (CTS) in Japan, which has a current recovery rate of 22%. This highlights the fact that full connectivity has not yet returned to pre-COVID levels, especially for some of the domestic city pairs in Japan. While airlines are trying to restore their capacity and network, there are also domestic routes in other Asian countries such as in Indonesia or China, with the domestic route from Guiyang (KWE) to Shenyang (SHE) as one concrete example, even not appearing within the above ranking. This indicates that demand for some routes within China remains low, despite IATA projecting that domestic air travel in China will likely recover to its 2019 monthly level by summer 2023.

While the demand for international routes in Asia is already showing positive signs with promising markets for new direct flights, there is still catching up to do for domestic routes in several Asian countries in terms of passenger demand and volume compared to 2019 levels. It will be interesting to observe to what extend the potential of the untapped Asian routes will be unleashed in the coming weeks and months.