Australia’s Qantas restarts direct flights to Beijing after eight years

News Hour:

Australia’s Qantas Airways relaunched daily non-stop flights from Sydney to Beijing on Thursday ahead of the Lunar New Year break, resuming the service after an eight-year gap in a bid to buoy Asian growth as competition increases elsewhere.

An intense price war as more planes fly international routes has been eroding earnings for airlines globally. But making matters worse for the Australian flagship carrier are challenges on the hotly contested “kangaroo route” between Australia and London on which some 30 airlines operate.

Qantas’ European market has shrunk to 12 percent of its total international business from 30 percent eight years ago, while Asia’s share has jumped to 50 percent from 30 percent, reports Reuters.

“We think now is the perfect time, the market’s very different from when we were last in Beijing which was 2009, just after the global financial crisis,” Chief Executive Alan Joyce told Reuters in an interview in Beijing.

“We’ve seen huge growth in this market,” he said, adding the Sydney-Beijing route would also help underpin the airline’s domestic business by bringing in more tourists.

Qantas, however, is expected to face stiff competition from China’s state-owned carriers, such as Air China , that aided by generous state subsidies have been spending billions on new planes and offering cheaper fares.

The fare for an Air China Sydney-Beijing flight is around A$350 ($264.50), while Qantas charges A$650 because “people are willing to pay a premium for Qantas” brand, Joyce said.

Analysts believe the Qantas fare takes into account stronger demand for Australian business into China.

“A lot of the economics of this service into Beijing will stack up for Australian travelers to and from China,” said Anthony Moulder, Sydney-based Citi analyst.

“I would guess the vast majority of Chinese nationals are still going to stay on Chinese flag carriers.”

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