Analyst claims domestic air market 'terrible' for airlines

[Melburnian1]

An aviation sector company analyst today claimed that the Australian domestic air market was 'terrible' for airlines - presumably in the sense of having excess seats available compared to demand:

Big shareholders tighten grip on Virgin

When I travel domestically, fairly often I am on a full or close to full flight in Y (J may be a different story given the astronomical price difference and what I perceive for short sectors as very poor value for money).

Yields per seat are important, and when I am travelling I do not always know if the domestic airline has cancelled a previously scheduled flight due to low bookings that was meant to leave an hour ago.

That said, I struggle to find evidence of 'excess seat capacity' in terms of posteriors on seats (albeit that I do not know how much each passenger is paying). This is despite JB at VA having admitted if I rceall that his operation does not make any money on a 'strong' of country (secondary air) routes.

I do not travel on country routes such as MEL - MQL where there are three airlines competing for business (with motoring and train plus connecting coach being alternative travel methods). Perhaps on some routes like this there's a lot of empty seats.

How does one explain my experiences of close to full Australian domestic flights against the analyst's pessimism? Do you always or mostly find flights are packed? If not, what routes and times can be near empty, in which directkion and with which airline?

 

[DrA]

I've been on half full flights on PER-SYD and PER-MEL (and v.v) routes a number of times on Qantas.

Never really gave it much thought beyond "awesome, got the row to myself!​"...

 

[TomVexille]

I don't travel on country routes either, but airfares in Australia are quite cheap. At least between the majot cities.

 

[eastwest101]

I've been on half full flights on PER-SYD and PER-MEL (and v.v) routes a number of times on Qantas.

Never really gave it much thought beyond "awesome, got the row to myself!​"...

I know its not scientific but all of the east coast QF and VA flights I have been on have typically been 65%-95% load factors in Y, VA have had trouble filling their J cabins and QF less trouble filling J cabins. Note that I don't do much flying to PER so maybe the loss making is QF and VA expansion of capacity for coast to coast services. Certainly Y class airfare prices are fairly competative....

I would not be surprised that PER-MEL/SYD/BNE services and SYD-OOL services have been the "black hole" for QF and VA yields.... as numbers decrease in PER due to less FIFO traffic and OOL-SYD having 4 airlines all cutting eachothers throats.

Just my 2c......

 

[gwynne]

I flew return to Brisbane on VA on Tuesday. The 8am morning flight was about 65% full. The afternoon return we requested and were given a free earlier flight (from VA960 to VA954) apparently due to expected storm activity.

About 10 minutes before boarding 954, an announcement was made for all customers checked in on 960 to head to the service desk as it was cancelled due to weather (no sign of storms in Brisbane at departure, nor Sydney on arrival). Even despite the changed flight, 954 flew between 50 & 65% full. I was wishing then that Virgin shares could be shorted. Can't be economic.

 

[yohy?!]

It is not just a matter of more seats being put on that go unsold but rather more seats being sold at a discount thereby reducing the revenue coming in.

You can still have full flights but the airline is making no money or a loss (ala TT).

QF has a big problem with this at the moment with their warning of falling yields indicating that passenger revenue is collapsing.

 

[Fruitcake]

How does one explain my experiences of close to full Australian domestic flights against the analyst's pessimism?

See your third paragraph:

Yields per seat are important.

The number of seats occupied is nearly irrelevant. Airline yield management is now good enough that pricing can be adjusted enough to fill pretty much any flight at any time.

Note that Tiger had a load factor of 87% in September, VA had 77%, QF domestic had 75% and JQ domestic had 80%.

So both QF brands are behind their respective VA brands in terms of load factors... but QF group made a profit last year, whilst VA didn't.

 

[Andyc]

One thing to consider is the 65% market share position that Qantas pursues. We all know that Virgin has been expanding (new routes/planes, bigger planes, skywest growth), so presumably that means Qantas group has been expanding at double the rate to maintain their market share.
Simplistically, for every new plane added by Virgin, two need to be added by Qantas group.

I've never checked the data on this, but the logic makes sense to me.

 

[JohnK]

In my experience in the past 6-12 months the loads on SYD-BNE and SYD-OOL have been around 50%-80% outside of school holidays.

 

[vertisol]

AM flights ex CBR are always full but if you come back before 1630 it's a different story. I've been on plenty of 734's ex Mel in the middle of the day with less than 15 pax.