The Sky is the Limit for Chinese airlines in Australia

Melbourne Airport’s success in securing direct flights between Melbourne and Chengdu with the arrival of Sichuan Airlines in February, signals big opportunities for Australia in attracting Chinese visitors beyond its two biggest cities, writes Sophie Loras.

 
In late February, Melbourne Airport performed a significant coup.
 
Representatives from Tourism Victoria, the Victorian State Government, under the leadership of then Victorian Premier Ted Baillieu, and senior Melbourne Airport business development and management staff, had gathered at the airport’s viewing area to witness the landing of Sichuan Airlines’ first direct flight from Chengdu as it landed on the Melbourne tarmac. The arrivals – who included high profile dignitaries from Sichuan’s provincial government, provincial and municipal business leaders, representatives from Chengdu’s Shuangliu International Airport and big players from the Civil Aviation Administration of China were warmly welcomedaviation_130228_arrival_of_sichuan_airlines_cake_web with handshakes, toy koalas and cake.

The Chinese delegation was then treated to lunches and dinners hosted by Tourism Victoria and Melbourne Airport and a long weekend of visits to some of Victoria’s most iconic tourist attractions including the Great Ocean Road and Phillip Island.

*Pictured right: Celebration time – Victorian and Sichuan VIPs celebrate the arrival of Sichuan Airline’s first direct flight between Chengdu and Melbourne on February 28, 2013. From left to right: Mr Wu Mian, Deputy Director of Sichuan Tourism Bureau, Ted Baillieu, Former Victorian Premier, Mr Zhang Guilong, Party secretary of Sichuan Airlines, Chris Woodruff, CEO Melbourne Airport, Mr Liang Chaoping, Deputy Director of CAAC, Mr Shi Weiqiang, Chinese Consul General to Melbourne, and Mr Shi Zhuyi, Deputy General Manager of Sichuan Airlines. (Courtesy Melbourne Airport)

 
 
The deal to have Sichuan Airlines introduce a thrice-weekly service between Melbourne and China’s burgeoning western city of Chengdu represents not only a coup in attracting a Chinese airline to Melbourne over Sydney, but the new direct route will undoubtedly open enormous business, education and tourism links for the State of Victoria to untapped opportunities in western China.
 
The arrival of Sichuan Airlines to Melbourne comes at a pivotal time in Australia-western China relations.aviation_130228_arrival_of_sichuan_airlines_001a_web

In April, the “Australian Spring” as it is being dubbed, will see Australia open its fourth consulate in Greater China – in Chengdu, alongside the launch of AustCham West China. Austrade has an existing presence in the region but last year appointed Beijing-based Trade Commissioner David Dukes to manage a West China team as a separate regional entity.

The Australia China Business Council is also leading a delegation to Chengdu, in conjunction with the annual Australia China Economic and Trade Forum in Beijing.

*Pictured above: Former Victorian premier Ted Baillieu – who took a personal interest in the deal to see Melbourne secure the arrival of Sichuan Airlines after his Super Trade mission to the region last year, greets Chinese dignitaries on the tarmac at Melbourne Airport on February 28, 2013.

 
Sichuan is home to more than 80 million people and the gateway to a region which accounts for a growing share of China’s trade, foreign investment and economic growth. Chengdu is the central gateway to a western region encompassing the provinces of Sichuan, Yunnan, Guizhou and Chongqing Municipality.
 
The Sichuan Airlines deal is the culmination of more than two years hard work, beginning with the signing of a ‘sister airport’ agreement between Chengdu’s Shuangliu International Airport and Melbourne Airport in April 2012.
The agreement entailed more than solely the establishment of the Chengdu-Melbourne flight service but encompasses long-term arrangements between the two airports to share experiences in management, best practice, customer service, staff exchanges and route development.
 
“The sister airport agreement with Chengdu Shuangliu International Airport is an extremely important aspect of building Victoria’s aviation, business, education and tourism links with a significant growth region in China,” says Melbourne Airport CEO Chris Woodruff.
“The fact that Sichuan Airlines has chosen Melbourne as its first Australian destination and only its second long-haul international destination is hugely significant for Melbourne Airport.  It’s also very significant for Victoria.aviation_130228_arrival_of_sichuan_airlines_web As we look to strengthen our tourism, business and education ties with China, Victoria is now linked directly by air to the thriving Sichuan Province and Chinese travellers are now directly linked to Australia.”
*Pictured right: Former Victorian Premier Ted Baillieu with crew from the inaugural Sichuan Airlines direct flight between Chengdu and Melbourne.

Melbourne Airport has led the way in ensuring Chinese tourists – who now account for Australia’s largest number of long-haul arrivals, and biggest international tourism group by value (worth A$4 billion annually) – are warmly welcomed upon their arrival. The airport has introduced Mandarin signage and announcements throughout the terminal, a Chinese language website, Chinese language and cultural courses for airport staff, Chinese group facilitation, and for a number of years has welcomed Chinese visitors during the peak Chinese New Year travel period with special performances, including lion dances. Most recently it launched a number of new retail options in the airport’s duty free area to specifically cater for the Chinese market.

Bill Astling, a partner of Hermsley Aviation Services, the company which assisted Sichuan Airlines to secure the regulatory approvals necessary to operate in Australia, says the deal is important for a range of reasons – not least because it represents the first direct service out of China to Australia that does not connect via Shanghai, Beijing or Guangzhou.
 
“This deal opens up a new destination and new tourism and business opportunities between southwest China and Victoria and Australia generally,” says Mr Astling.
 
“Everyone is concentrated on Shanghai or Beijing and this is the first time the other side of China has got a direct connection, so it has major importance with Sichuan having a population of over 80 million.”
 
Mr Astling says airlines have demonstrated that with a direct link, demand increases by 40 percent within the first 12 months.
 
Low cost airlines such as Ryanair, Jetstar Asia, Air Asia and easyJet, have had successes by creating direct connections to lesser bases and then having great success in developing that tourism market, “and the same thing will happen with the Chengdu – Melbourne connection,” he says.
 
Chinese tourists for the time being will continue to prioritise visits to Sydney and Melbourne and to Brisbane to a lesser extent.
 
“Then they will start to come to Adelaide and Tasmania and then regional areas will open up and this will include a mix of business people as well as tourists and this will increase demand more,” says Mr Astling.
 
China Southern, which has made the most aggressive push of all the Chinese carriers in servicing the Australian market, is the airline most likely to lead the way in the push for air services beyond Australia’s two main cities. Currently it is the only Chinese airline offering direct flights between China and Perth (three times a week) and Brisbane (four times a week) out of its hub in Guangzhou. Over the Chinese New Year period in February, the airline increased its Brisbane service to daily flights with thrice-weekly flights to Cairns.
 
The impact these additional flights have had for Australia’s tropical north Queensland region speak fortnq_bnp_120818-7125_web themselves.
 
Over the 2013 Chinese New Year period – a peak period for Chinese tourism to the tropical north Queensland region, Cairns saw a 25 percent increase on Chinese visitors over the four-week period compared to the same period in 2012. Total visitor numbers from China to Cairns over the lucrative Chinese New Year travel period grew from 16,000 in 2012 to 20,000 in 2013.
 
*Pictured above: Tropical North Queensland saw a 25 percent increase in Chinese visitors to the region over the peak Chinese New Year period as more direct flights between China and Cairns were introduced in 2013. (TTNQ)

This was facilitated by seven direct charter flights from China in addition to the China Southern seasonal services running three times a week over the four-week period and China Eastern operating a scheduled year-round service of three flights per week between Shanghai and Cairns. Cathay Pacific has for many years offered a daily service between Hong Kong and Cairns, which has helped facilitate the international tourism market beyond China. These figures also include Chinese tourists who transited to Cairns via Brisbane, Sydney and Melbourne.tnq_bnp_120817-6685_web

 
“We maintain a regular dialogue with a range of carriers in China and around the Asia Pacific region and we are always ready to talk to carriers who are looking at new direct services to Cairns,” says Brian Hennessy, Tourism Tropical North Queensland’s Sales and Marketing Manager.
 
China is now the region’s number one visitor market by passenger volume. In the year to December 2012, the region welcomed 108,000 visitors from China. And ultimately, it hopes to double those figures by 2015.

 
*Pictured above: Tropical North Queensland welcomed more than 100,000 visitors to the region in 2012 and hopes to double that figure by 2015. (TTNQ)

China Southern’s Regional General Manager for Australia & New Zealand, Mr Henry He, says many of its special Chinese New Year flights to Cairns sold out months in advance which bodes well for future links to the region.
 
“Following the success of the seasonal services to Cairns, we’re considering operating services again during the next high season period which may eventually lead to a more permanent presence in the far north,” says Mr He.
 
The success of the Cairns service also bodes well for other Australian cities including Adelaide.
 
“Since we began developing our presence in Australia several years ago to cater to this growing demand, the passionate and friendly people of Australia have left a deep impression on us and made us feel more confident than ever in the future growth of China Southern Airlines in the Australian market,” says Mr He.
 
“We remain focused on Australia as a priority market and are still looking to expand services here. Several Australian destinations are currently being discussed as future ports,” he says.
 
China Southern has a goal of flying 55 weekly services to Australia and New Zealand by 2015.
 
Mr Astling warns though that the success of any new routes between Australian and Chinese cities will depend largely on interest both ways – without outbound interest for the return journey, any air services to regional Australian cities will not be viable. And this will be a constant issue for regional cities such as Cairns.
 
He says Chinese airlines to watch in the future include Hainan Airlines, Shanghai Airlines, Xiamen Airlines and Wuhan Airlines.
 
Air services from affluent second-tier cities such as Xiamen and Wuhan would be a boon for Australian tourism in accessing these promising markets.
 
Hainan Airlines began its first foray to Australia in 2011 with direct flights between Sydney and Shenzhen and a connection on to Haikou three times a week but that service has since been suspended.aviation_melbourne_airport_chinese_carriers_2_web
 
Marketing their services and offering English-speaking customer service will be a key element for the success of Chinese airlines entering the Australian market.

*Pictured right: Chinese air carriers at Melbourne Airport – a sign of things to come. (Courtesy Melbourne Airport)

 
Tourism Australia says growing the China inbound market is critical to Australian tourism achieving its Tourism 2020 goal to double overnight visitor expenditure to up to A$140 billion annually by the end of the decade.
 

“To do this, we need good aviation access and sustainable air capacity,”
says Tourism Australia, Managing Director, Andrew McEvoy.
 
 

Tourism Australia already enjoys strong cooperative marketing relationships with all of the main international carriers serving Australia out of China, including China Eastern, China Southern, Air China, Qantas and Sichuan Airlines.

 
In 2012, the Australian tourism body signed strategic MoU agreements with both China Southern and China Eastern and have shorter-term marketing relationships with the other carriers.
 
Additional funding provided under the Asia Marketing Fund, announced by the Australian Government in 2012, is also being invested to promote new aviation routes from within China to Australia.
 
Chengdu is one of three new cities in China being targeted by Tourism Australia this year, using money from the new Asia Marketing Fund, as part of a broader China geographic strategy of deepening Australia’s marketing footprint into China’s secondary cities.
 
Mr McEvoy says research clearly demonstrates the appetite for travel among the new middle classes in these secondary cities, “but to fully realise these opportunities it’s critical that we get more capacity and, in particular, more direct flights such as Sichuan’s new Melbourne service.”
 
“Moving forward, we’re very focused on helping to fill existing seats, but we do still see potential for some new routes, most likely to be between Australian gateway airports and Chinese secondary cities, or Chinese gateway airports to Australian secondary cities, such as Adelaide and Cairns,” says Mr McEvoy.
 
“Most importantly, we’re working directly with our state and territory tourism partners and Australia’s regional airports to put the ‘regional Australia’ case strongly and in a more coordinated manner,” he says.
 
A recent high level delegation of Australian airports attending Routes Asia in 2012 included Cairns, Darwin and the Gold Coast as well as the main east coast gateway airports of Melbourne, Sydney and Brisbane.
 
“While a big focus will be filling existing seat capacity from China, we still see potential for new capacity into regional Australia, building on the good work done last year with China Eastern and China Southern, both operating new services to Cairns,” says Mr McEvoy.
 
“We had success this Chinese New Year, with a number of special Chinese charters into Adelaide and the Gold Coast and this is certainly something we’re keen to see evolve, ideally to seasonal services in the future.”
 
Air capacity between Australia and China continues to grow exponentially, with six international carriers currently flying approximately 1 million seats per year between China and Australia.
 
Direct services are operated by China Southern, Qantas, Air China, China Eastern, Jetstar and Sichuan Airlines.aviation_sichuan_delegation_victoria_phillip_island_20130303_web Tourism Australia says conservative estimates of seat capacity are expected to triple to more than 2.4 million seats by 2020 with potential new entrants and existing carriers looking to add flights and open up new destinations such as Adelaide and Cairns.
 
*Pictured right: Tourism Victoria hosts delegates from Sichuan with a tour of the state’s iconic Phillip Island as part of celebrations for the inaugural Sichuan Airlines flight between Chengdu and Melbourne in February. (Courtesy Tourism Victoria)

Opportunities

 
The opportunities these new routes open for Australia go beyond tourism, education and business links. In September 2012, Boeing, which accounts for more than half of all commercial jetliners operating in China, released a report showing the country will need 5,260 new commercial airplanes by 2031, at a cost of $US670 billion. More than 75 percent of these aircraft will be needed to meet increased market demand – not just to replace old planes.
 
The report also shows airline companies in China are expected to expand international business at an average annual rate of 8.9 percent over the next two decades.
 
This will offer increased opportunities for Australia’s aviation and training sectors, which already assist in a range of areas including pilot training and airport management, as China upgrades and builds new airports and fleets for this aviation boom. 
 
Chinese visitors to Australia by port of arrival – 2012 (% of total)
Sydney – 282,041 (45%)
Melbourne – 197,470 (32%)
Brisbane – 83,627 (13%)
Perth – 26,229 (4%)
Cairns – 13,846 (2%)
 
Adelaide – 11,337 (2%)
Gold Coast – 10,817 (2%)
Darwin – 745 (0%)
Other – 29 (0%)
TOTAL – 626,141
*Source: DIAC / Tourism Australia
 

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