Air Service Agreement Opens the Door Between China and Australia

Under the revised air services agreement, both countries’ carriers will immediately be able to operate 26,500 seats a week between Beijing, Shanghai and Guangzhou to the major gateway cities of Sydney, Melbourne, Brisbane and Perth – an increase of 18 percent on the routes.

A new bilateral agreement between China and Australia will see an increase in seat capacity and flight frequencies between the two countries.

Under the revised air services agreement, both countries’ carriers will immediately be able to operate 26,500 seats a week between Beijing, Shanghai and Guangzhou to the major gateway cities of Sydney, Melbourne, Brisbane and Perth – an increase of 18 percent on the routes.

An additional 7,000 seats will be phased in weekly over the next two years, raising the number to 33,500 weekly seats by 2016.

Australian Trade and Investment Minister Andrew Robb, who is responsible for tourism said the new arrangements build on the success of the China-Australia Free Trade Agreement (ChAFTA) concluded recently with Beijing.

“Last year, 100 million Chinese travelled abroad and this is set to double to some 200 million by 2020. Tripling aviation capacity from China into Australia over the next two years will ensure we are well placed to capture our share of this growth,” he said.

Total capacity between Australia and China will almost triple from the current limit of 22,500 seats to 67,000 seats a week by 2016.

The new agreement will also recognise the significance of emerging markets in China, with additional capacity being dedicated to cities in China other than Beijing, Shanghai and Guangzhou.

China is Sydney’s largest and fastest growing market, increasing 16.4 percent in 2014 and accounting for half of all foreign nationality growth. Sydney Airport is already in discussions to take advantage of these new air rights, and the airport managing director and chief executive officer, Kerrie Mather said that the new agreement places Sydney and the region of New South Wales in the box seat to attract more Chinese tourists

“We have been in discussions with a number of Chinese airlines that want to fly to Sydney, but the existing agreement has been at capacity over the peak season for a number of years,” said Ms Mather.

Based on the current growth rates, China is on track to overtake New Zealand as Australia’s largest inbound market in 2016, and this will enable airlines to capitalise on the markets consistently strong growth.

Currently, four mainland Chinese airlines including Air China, China Eastern, China Southern and Sichuan Airlines fly to Sydney, with direct services to five mainland cities including Beijing, Shanghai, Guangzhou, Chongqing and Nanjing.

“Over the past five years, Chinese airlines have doubled seat capacity to Sydney, with the number of weekly services rising from 48 to 82. Just this week, China Eastern announced it would be increasing its Shanghai-Sydney service from seven to 10 frequencies a week from mid-June,” Ms Mather said.

More than 100 million Chinese travel abroad each year with 760,000 travelling to Australia in 2013-14. Increasing air capacity between the two countries will ensure that Australia will be able to compete for a greater share of Chinese international travellers.

“We have significantly stepped up our efforts to provide services to this market, introducing Mandarin-speaking airport ambassadors, Chinese signage, guides, a Chinese version of our website and our free app and encouraging our retailers to accept Chinese credit cards as a form of payment,” Ms Mather said.

In our analysis, below, we highlight the growth in scheduled air passenger demand between China and Australia over the last five years.  According to MIDT data, bi-directional O&D demand between the two countries has risen 56.7 per cent from 1.09 million passengers in 2009 to 1.71 million in 2013.  Statistics for the first eleven months of 2014 suggest that last year will be a record year with estimated passenger demand close to exceeding the full year performance of 2013, with a 6.3 per cent increase against the same period in 2013.


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