Air Transport World

New times down under. (Australian domestic airline industry) (Company Profile)

CANBERRA--As the primary air-transport sectors of North America and Europe ply through another winter of negative growth, bear a thought for distant Australia, where the number of passengers flying rose by an incredible 38% in the past year.

And this has been achieved in a period of record 10% unemployment and an economic recession worse than any since the 1930s. That this startling increase in traffic was generated by just one single eventderegulation-is testimony to the viability of the free market system vs. one of complex and stringent government control.

Domestic air routes were deregulated officially at midnight on Oct. 30, 1990. However, in the true tradition of the two major players, Ansett and Australian, little really occurred except some advertising and limited seat specials marketed largely as attention getters.

Perhaps for cynical observers, true deregulation came into being on Dec 1, when Compass Airlines, the only new entrant to make the runway, launched service between Brisbane and Sydney.

The emergence of Compass, which both of the majors naively had thought would not, truly had ushered in an era of real discounting and innovative marketing. To prove this, one needed only to look at the fare structure on any route before and after its arrival. Usually, fares dropped by up to 50%, which has caused traffic levels into such previously "expensive" ports as Perth, Adelaide and Cairns to increase by as much as 70%. The trend should continue, even though Compass has folded.

Indeed, it was amazing that one airline, operating just three jets, could wield so much influence over the entire market. Prior to its demise in late December, Compass held close to a fifth of the total market share in RPM terms and up to a third on the sectors that it flew directly against the big two.

A contributor to the excellent uplift was the fact that Compass was using the brute power of the 280-seat Airbus A300-600R to compete with airlines typically using Boeing 737-300s with just 112 seats in spacious 3-class configurations. Thus, its impact on a market that this year should see 16 million customers is substantial to say the least. …

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