Western Sydney Airport (WSI) Discussion

[evanb]

Its likely to be cheaper. Which could JQi moving over. Not just one kr two flights but all JQi ops. Also takes them out of the SYD QF lounge for the QF status/Q club holders.

Mainline QFi we won't see much movement for ages if ever. Maybe one day they'll have a huge network and theres not enough to land into SYD anymore.

I don't think it's a fait accompli that WSI will be much cheaper. It hasn't been developed as a cheaper or lower cost airport, rather it's been developed to add capacity. Nothing about its design and building has been focused on being cheaper. But point taken that it should have a cost advantage because SYD's costs are just that high. Nevertheless, QF/JQ own or have long leases on various key infrastructure at SYD that when combined with their economies of scale when negotiating with SYD does give them a substantial cost advantage that they won't have at WSI.

I don't think we should discount the importance of network effects and feed into JQ's international ops at SYD, especially for routes like ICN and RAR while others like DPS or HKT might be just fine without it. Honestly, I just don't think that we'll see any QF group international at WSI for a while unless the route is specific to the local catchment.

 

[Doddler]

I don't think it's a fait accompli that WSI will be much cheaper. It hasn't been developed as a cheaper or lower cost airport, rather it's been developed to add capacity. Nothing about its design and building has been focused on being cheaper. But point taken that it should have a cost advantage because SYD's costs are just that high. Nevertheless, QF/JQ own or have long leases on various key infrastructure at SYD that when combined with their economies of scale when negotiating with SYD does give them a substantial cost advantage that they won't have at WSI.

I don't think we should discount the importance of network effects and feed into JQ's international ops at SYD, especially for routes like ICN and RAR while others like DPS or HKT might be just fine without it. Honestly, I just don't think that we'll see any QF group international at WSI for a while unless the route is specific to the local catchment.

I can tell you what *would* get Qantas flying to/from WSI. If a company like Rex started operating from there.

 

[AuSammy]

I can tell you what *would* get Qantas flying to/from WSI. If a company like Rex started operating from there.

QFg have already signed up to fly from WSI, limited capacity initially admittedly.

 

[evanb]

I can tell you what *would* get Qantas flying to/from WSI. If a company like Rex started operating from there.

Why would Rex fly to/from WSI? The PRSS slots at SYD give them a sweetheart deal. This applies equally to Qantas. Neither of Rex and Qantas are going to shift regional flying to WSI since it won't allow them to utilise those slots at SYD for anything else.

That said, Qantas have already signed various leases at WSI. Capacity thresholds in some of those will need them to base about 15 aircraft within first year. Their public statements say 10 JQ and 5 QF.

Another good indicator of which airlines might do what there are what service providers are doing. Even before Qantas's announcement of 5 QF aircraft, was that Dnata signed a lease to build a catering facility ...

 

[Doddler]

Why would Rex fly to/from WSI?

It was a bit of tongue-in-cheek

 

[RSD]

I don't think it's a fait accompli that WSI will be much cheaper. It hasn't been developed as a cheaper or lower cost airport, rather it's been developed to add capacity. Nothing about its design and building has been focused on being cheaper. But point taken that it should have a cost advantage because SYD's costs are just that high. Nevertheless, QF/JQ own or have long leases on various key infrastructure at SYD that when combined with their economies of scale when negotiating with SYD does give them a substantial cost advantage that they won't have at WSI.

QF will also have another negotiating tactic with SYD once WSI opens - there will be an alternative.

 

[stm1sydney]

Why would Rex fly to/from WSI? The PRSS slots at SYD give them a sweetheart deal.

It was just an example to highlight the predatory anti-competitive market conduct in which Qantas engages on a regular basis.

 

[RooFlyer]

I don't think it's a fait accompli that WSI will be much cheaper. It hasn't been developed as a cheaper or lower cost airport, rather it's been developed to add capacity.

What do you think about the possibility of WSI offering “cheaper” fees and charges to encourage business, say for 3 to 5 years?

 

[evanb]

It was just an example to highlight the predatory anti-competitive market conduct in which Qantas engages on a regular basis.

The OP begs to differ

But the irony is that QF actively lobbied against the concept of the PRSS slots in the first place and have been lobbying for their removal/reform ever since, yet they persist. PRSS slots are one of the biggest impediments more competition.

 

[evanb]

What do you think about the possibility of WSI offering “cheaper” fees and charges to encourage business, say for 3 to 5 years?

WSI don't need to. SYD's capacity constraints at peak times are such that there's plenty of pent up demand from domestic airlines to start new flights, it's part of why Virgin, Qantas and Jetstar have more aircraft on order than immediate replacement needs.

But we can take the practical view. JQ and QF have committed 10 and 5 aircraft to WSI in the first year. That's incremental capacity growth that they've planned for. It's not coming across from SYD. Now is the argument that if they cut their fees they'll attract JQ and QF to move flights over from SYD? They could, but they would inevitably lose the SYD slots. Don't see them giving up those slots for a small short term cost savings?

 

[justinbrett]

The question is how big of a loss is the shareholder (Australian Government) prepared to accept and for how long.

I think it’s easier to hand out incentives and keep fees and charges at sustainable levels than make a loss and have to increase them later.

If the government ever wants to sell WSI, the books look better if they’re making a profit and incentives are given independently of the airport - like what already happens at other commercially owned airports.

 

[evanb]

The question is how big of a loss is the shareholder (Australian Government) prepared to accept and for how long.

I think it’s easier to hand out incentives and keep fees and charges at sustainable levels than make a loss and have to increase them later.

If the government ever wants to sell WSI, the books look better if they’re making a profit and incentives are given independently of the airport - like what already happens at other commercially owned airports.

Point taken, but this presumption works off a principle that some temporary cut in airport fees will generate enough incentive for airlines give up capacity in SYD and hence give up their historical reclaim to slots while loosing network connectivity.

It might work for Ryanair to shift capacity from airports with limited slot value and zero network effects, but not convinced that it'll shift Australian carriers. Just look at Haneda and Heathrow as examples, despite huge cost savings it didn't get any non-forced capacity shifting. Sydney is more of a Haneda or Heathrow than it is Frankfurt, Rome or Paris.

 

[justinbrett]

Point taken, but this presumption works off a principle that some temporary cut in airport fees will generate enough incentive for airlines give up capacity in SYD and hence give up their historical reclaim to slots while loosing network connectivity.

It might work for Ryanair to shift capacity from airports with limited slot value and zero network effects, but not convinced that it'll shift Australian carriers. Just look at Haneda and Heathrow as examples, despite huge cost savings it didn't get any non-forced capacity shifting. Sydney is more of a Haneda or Heathrow than it is Frankfurt, Rome or Paris.

I wasn’t necessarily saying it would happen, just that if it did I’d expect it to be done through separate government incentives rather than discounting fees.

As you point out it might not be needed at all. Maybe VA is hanging out for an announcement and when they realise it’s not coming they’ll commit anyway.

 

[RooFlyer]

some temporary cut in airport fees will generate enough incentive for airlines give up capacity in SYD and hence give up their historical reclaim to slots while loosing network connectivity.

I was actually thinking more about possible new services. As in: hey Qantas, if you want to start up that possibly marginal new service, Sydney to xx_ - we have a deal for you so you can give it a try.

But I guess that then comes up against the old lack of aircraft problem.

 

[Sabot]

What do you think about the possibility of WSI offering “cheaper” fees and charges to encourage business, say for 3 to 5

I was actually thinking more about possible new services. As in: hey Qantas, if you want to start up that possibly marginal new service, Sydney to xx_ - we have a deal for you so you can give it a try.

But I guess that then comes up against the old lack of aircraft problem.

And the lack of people wanting to transit into the middle of nowhere to fly out of WSI.

 

[RooFlyer]

And the lack of people wanting to transit into the middle of nowhere to fly out of WSI.

By transit, I guess you mean travel to the airport?

Covered about 10 times upthread. WSI is not in the middle of nowhere for millions of people. Population catchment almost twice that of South Australia.

 

[Sabot]

By transit, I guess you mean travel to the airport?

Covered about 10 times upthread. WSI is not in the middle of nowhere for millions of people. Population catchment almost twice that of South Australia.

That's correct yes.

Mate, I had to zoom out on the map 3 times to see if it was actually even in Sydney.

 

[moa999]

Think the lack of transit options will mean the majority of international flights remain at SYD until WSI grows into itself and expands.

Some international back of clock operations probably the initial exception (eg SQ to SIN and QF/JQ to AKL, maybe with time EK with a midnight departure) with perhaps a smattering of narrowbody services to NZ and Bali.

Will be interesting to see how routes develop.

 

[HS-TQE]

I wasn’t necessarily saying it would happen, just that if it did I’d expect it to be done through separate government incentives rather than discounting fees.

As you point out it might not be needed at all. Maybe VA is hanging out for an announcement and when they realise it’s not coming they’ll commit anyway.

VA under Bain has had a record of leaving markets on the table where they are not comfortable in making money, e.g deciding to no longer return to trunk NZ routes to AKL/CHC/WLG and the decision to arrange a "glorified travel agent" one way partnership with Air New Zealand to serve those routes in a limited capacity.

Also as explained, VA doesn't have the fleet to serve WSI and are not willing to give up slots at SYD to serve WSI, thus the cuts will have to come out of other services out of BNE or MEL.

This isn't the Borghetti era where VA enters in response to QF (and crash and burn e.g the A330s on Transcons and the capacity war). Bain pretty much runs their own race and numbers on routes.

If they feel that cutting services elsewhere to serve WSI isn't worth the risk for VA, they will stay out of WSI initially until they get the extra aircraft to do so.

 

[justinbrett]

VA under Bain has had a record of leaving markets on the table where they are not comfortable in making money, e.g deciding to no longer return to trunk NZ routes to AKL/CHC/WLG and the decision to arrange a "glorified travel agent" one way partnership with Air New Zealand to serve those routes in a limited capacity.

Also as explained, VA doesn't have the fleet to serve WSI and are not willing to give up slots at SYD to serve WSI, thus the cuts will have to come out of other services out of BNE or MEL.

This isn't the Borghetti era where VA enters in response to QF (and crash and burn e.g the A330s on Transcons and the capacity war). Bain pretty much runs their own race and numbers on routes.

If they feel that cutting services elsewhere to serve WSI isn't worth the risk for VA, they will stay out of WSI initially until they get the extra aircraft to do so.

But they were completely happy flying a 737 to Japan

WSI-BNE/MEL is not high risk. It’s a sure thing, just a matter of frequency. Operating them once or even twice a day is a reasonable investment and could be done with a single aircraft.

The problem is some rusted on VA flyer out of SYD who lives in the west, switches over to QF/JQ because they don’t have the option of flying VA. VA’s market share is in the low 30s. You don’t improve that by sitting out major routes.