Reply To: Alex on… Can Thai and MAS fully utilise their A380s?

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It seems that airlines are gambling on an ever increasing demand. And, yes, they have to plan ahead as planes take quite a while to be delivered. In the mean time market conditions can change for better or worse.

But is this only a problem for Asian carriers like Thai and MAS? I doubt it. They are based in a region where economic growth is still high, the middle class, their main target as far as travel is concerned, is growing quite rapidly.
Also the leisure market is booming. More and more people from the EU vacation in the Middle East, Asia and Australia. People from Asia are travelling in large numbers to Europe.

Airlines are planning ahead and invest in planes that will be operated for at least the next 20 years or longer. Capacity is set to increase, but for the most popular destinations and hubs there are limited slots available. The solution: bigger planes.

A situation is developing much like in the 1970’s when wide body planes like the 747, DC-10 and L1011 came on line. The question then was the same as it is right now: how are they ever going to fill these planes?
The main answers: mobility increased and prices fell. People started to fly and kept flying ever more.

I believe that the market will eventually be big enough for most airlines to fill their planes. I am not so sure all airlines will survive. But then again that was the same in the 1970’s and 1980’s.
Now I think the competition will be on price and service.

A battle where European airlines are at a disadvantage compared with Middle East carriers, because of their access to cheap money, low cost of labour and oil, and the Asian carriers because of the level of service and cheap labour.

Looking at for instance the Kangaroo route I feel that carriers like Qantas, Virgin and BA are at risk. Qantas and Virgin have recently signed deals with Middle East carriers to stay in the competition, but hand over a substantial amount of marketshare on this route. BA lost a valuable partner in Qantas and seems to be cutting back on this route. This will probably be substituted as QR joins One World, but what is in it for BA? Is for instance the British market big and loyal enough to keep flying home carriers or will they choose other options available?
Will European carriers be able to fill all their seats on routes to the Middle East and Asia where they are in competition?

I think the risks being taken are not with the likes of Thai and MAS or for that matter SQ, CX, EK, EY, QR, etc. We should take a look a lot closer to home and come up with a solution to counter that threat. And fast.

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