Capital city rivals out to land Asia

07 August 2009

MELBOURNE airport chief executive Chris Woodruff is determined to grab market share from arch-rival Sydney and points to new services from AirAsia X as the latest coup in his ongoing battle.

The competitive British airport chief wants to boost Melbourne's share of the national aviation passenger market from 20 to 25 per cent and says it will do the best it can to convince airlines it can offer better service and lower prices than its northern neighbour.

"They have a market that's rightfully mine," Mr Woodruff said during a press conference in Sydney this week to announce the new services. "If you do the research there's ... anywhere between 600,000 and a million people who want travel to and from Victoria and can't internationally and have to go to Sydney.

"So there's about a million there and we'll try and bring our customers home."

AirAsia X will increase services from Kuala Lumpur to Melbourne by four flights to 11 a week from December 1 and expects to boost that to double daily next year. That is about the same time the long-haul low-cost carrier, which also serves the Gold Coast and Perth, hopes to start serving Sydney.

The airline estimates it has already captured a third of the KL-Melbourne market and it plans to boost this with cheap fares aimed at leisure, visiting friends and relatives (VFR) and student traffic.

Mr Woodruff said more Malaysians visit Melbourne than any other Australian city.

"It was already a big market but after AirAsia X started serving it, that market grew by 33 per cent ... today's announcement will grow that even more and it's very, very Melbourne-centric."

AirAsia X chief executive Azran Osman-Rani said the new Melbourne services were timed to take advantage of the Christmas travel season and would make it easier for passengers to connect with flights in both Asia and Australia.

"I think one of the issues we've had flying in once a day, late at night, into Melbourne is that it makes it a bit difficult to take an onward flight to Tasmania or Sydney," he said. "Now with the second flight, for example, it's much easier for somebody from Sydney to come in during the day and catch the day flight and return."

Mr Osman-Rani said the 33 per cent growth in the Melbourne-KL market demonstrated that the airline was increasing the market and not just taking it from other carriers.

He believed it would grow disproportionately higher than the four new services would indicate because of a network effect.

Asked about delayed services to Sydney, Mr Osman-Rani reiterated comments reported in The Australian last Friday that the service was still on the cards and under consideration by the Malaysian government.

He said this year's delivery of A330 aircraft was already spoken for with increased frequencies to destinations such as Melbourne and the Gold Coast but three more planes were due to be delivered next year.

AirAsia X had benefited from some trading down by passengers during the economic crisis and carried more than double the passengers in the first half of this year than it did for all of last year. But the environment had been tough and yields had "taken a beating".

"I don't say this has been a fantastic time for us because it's equally challenging as well," he said. "To grow those passenger numbers we have had to be very aggressive on pricing."

The low-cost carrier is also revamping its cabins and introducing what looks like a business class seat which it describes as "almost lie flat". The product, which replaces the airline's XL seat, does not come with free-flowing champagne but passengers can sign up for packages with greater ticket flexibility and extras such as luggage.

"We realised that the incremental cost of this seat is not that significant when you divide it over the number of flights that we do in the lifetime of the seat," he said. He said the new seats were not expected to be huge revenue earners -- about a 1 to 1.5 per cent increase -- but they would enhance the brand.

Current estimates were that about 15 per cent of its customers on flights to London were business travellers and about 8 to 10 per cent across the network.