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Executive Summary
Potential for CZ to operate a split schedule to boost connectivity via CAN A split schedule maintains good connections to major Chinese cities and improves connections to LHR, ICN & NRT For the schedule to work effectively, it would be preferable for CAN-PER-CAN to be increased to 4/weekly with each 2 flights operating at different times of the day The schedule provides for same-day connections to LAX, CDG, & AMS however some connecting vary from 4 hours up to 8 hours These connecting times can be improved but will require forgoing connections to major cities in China in one direction or rescheduling the LAX/CDG/AMS flights
Cathay Pacific has relatively small market share to LAX, CDG, & AMS opportunity for CZ Important for CZ to have an efficient connecting product in CAN other Asian and Middle East carriers do this very well
CZ Connections in CAN
HKG
7,994km 7,261km 8,074km 16,295km 17,691km 15,654km 15,614km 15,298km
SIN
8,369km 7,689km 8,509km N/A 18,009km 14,783km 14,625km 14,412km
KUL
8,523km 7,911km 8,726km N/A N/A 14,734km 14,571km 14,365km
SYD
12,218km 11,121km 11,595km 15,768km 15,335km N/A N/A N/A
DXB
N/A N/A N/A N/A N/A 14,531km 14,272km 14,201km
Travelling via CAN offers competitive total journey times to Perth compared with other existing hubs
Source: Great Circle Mapper 4
To CDG
X
X X
X
X X X X X X X X
CZ389
CZ3091 CZ337 CZ303 CZ385 CZ3097 CZ329 CZ339 CZ327 CZ307
KIX
MNL ICN LHR NRT TPE YVR ICN LAX AMS
08:30
08:50 09:05 09:30 09:30 11:30 14:00 17:15 21:30 23:55
Scheduling is a key success factor to capture market share Current connections to key European, North American, and North Asian markets require long layovers, making it difficult for China Southern to compete with other airlines offering shorter connecting times Opportunity to schedule flights with limited connecting times & capture larger share of connecting traffic Need to continue offering good connections throughout China
Source: AirportIS, KVSTool 5
Connections to LAX, CDG, and AMS conflict with connections to key Chinese cities
Flight CZ328 CZ348 CZ308 From LAX CDG AMS Arrive CAN 05:20 06:10 06:45 Depart CAN 08:45 Arrive PER 16:55
To provide direct connections from LAX, CDG, and AMS to PER means forgoing connections from key Chinese cities Arrival into CAN from SHA and PEK start from 11:15am
Flight CZ327 CZ307 CZ347 Depart PER 11:00 Arrive CAN 19:25 To LAX AMS CDG Depart CAN 21:30 23:55 00:20
To provide direct connections from PER to LAX, CDG, and AMS as well as key Chinese cities means the flight from PER will need to arrive in CAN early to meet the last departures to SHA and SHE The last departures from CAN to SHA and PEK are at 19:40 and 20:00 respectively
Source: AirportIS, KVSTool 6
Split schedule scenario: potential for better connections to key cities with alternate CAN-PER-CAN schedule
Flight CZ328 CZ348 CZ308 CZ3391 CZ3596 CZ3108 CZ3548 CZ6301 CZ340 From LAX CDG AMS CGO SHA PEK SHA SHE ICN Arrive CAN 05:20 06:10 06:45 10:20 11;15 11:45 12:15 12:20 12:25 Depart CAN 14:00 Depart PER 23:20 Arrive PER 22:10
1 Hours 10 mins
Flight CZ337 CZ385 CZ303 CZ3531 CZ345 CZ3599 CZ3537 CZ3103 CZ3392 CZ3799 CZ3097 Flight Depart CAN 21:30 Depart PER 08:50 Arrive PER 05:40
3 Hours 10 mins
To ICN NRT LHR SHA PEK NKG SHA PEK CGO TAO TPE To PEK SHE SHA
Depart CAN 09:05 09:30 09:30 10:00 10:00 10:10 11:00 11:00 11:10 11:20 11:30 Depart CAN 19:00 19:40 20:00
Flight CZ338 CZ3395 CZ390 CZ3538 CZ330 CZ323 CZ3800 CZ3822 CZ304 CZ3104 CZ361 CZ3526 CZ386
From ICN CGO KIX SHA YVR PEK TAO NKG LHR PEK CGO SHA NRT
Arrive CAN 17:00 17:00 17:15 17:15 17:20 17:45 18:05 18:25 18:30 18;45 18;45 19:25 19:30
CZ320
CZ382 CZ3620 CZ3107 CZ327 CZ307 CZ347
PEK
PEK CGO PEK LAX AMS CDG
20:00
20:00 20:35 21:00 21:30 23:55 00:20
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Weaknesses of the split schedule While the schedule provides for same-day connections to LAX, CDG, & AMS, the connecting times vary from 4 hours up to 8 hours YVR only connects well in one direction KIX only connects well in one direction No connections to MNL
CDG
AMS LHR ICN NRT KIX TPE MNL
3.8%
4.8% 8.7% 38.4% 28.3% 31.9% 28.4% 18.7%
Opportunity for CZ to gain market share in LAX, CDG, and AMS where CX is weak, but it is difficult to create schedule that offers good connections in these markets
Source: KVSTool; All market shares from AirportIS apart from MNL (DIAC)
Largest North American market from PER; competitive; good yields; longer distance compared to via east-coast Australia
Second largest Euro market after the UK; competitive; good yields; longer distance compared to DXB, SIN
AMS
LHR ICN NRT TPE
25,000
240,000 25,000 28,000 22,000
6th largest Euro market; competitive; satisfactory yields; longer distance compared to DXB, SIN
Largest market; very competitive; longer distance compared to DXB, SIN; Limited number of competitors, all one-stop; strong yields; comparable distance to HKG Limited number of competitors, all one-stop; strong yields; comparable distance to HKG Competition is full service and LCCs, all one-stop; satisfactory yields; comparable distance to HKG & SIN
Source: Total Market Sizes from AirportIS are grossed-up by passenger card data (DIAC)
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Key differences from AirportIS UK market is 2nd highest SIN moves to 3rd USA and Canada are based on Western Australia as state of residence to include traffic via east-coast Australia
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Source: DIAC
London (LHR)
UK is the Second Largest Market from Perth
History of PER-UK Market
Pax (000's)
450 400
EK 21%
350
300 250 200
150
100 50
The Perth-UK market is ~400,000 pax with LHR 60% of the market QF has the highest PER-LHR market share although EK has highest UK market share with a range of 1-stop options
Paris (CDG)
History of PER-France Market
Pax (000's)
60
50
40 30
SQ 20%
CX 4% CZ TG 3% 2% Other 3%
20
10
EK 35%
EK largest market share twice daily PER-DXB connecting to twice daily CDG CDG via DXB is ~1,300km shorter than via CAN Market is not quite as competitive as LHR, but will still require good connections to compete with existing carriers Total France pax 53k in FY12, an increase of 11% YOY; 8-year average growth rate of 13%; CDG 89% of total France market Visitor arrivals for business up by 42% & arrivals for employment up by 59% (total France) Average fare of $1,547 equates to a yield of 10.85 US cents/km which is higher than LHR Strong demand for premium seats: 23.5% of pax are in business or first class
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Amsterdam (AMS)
History of PER-Netherlands Market
Pax (000's)
30
25
20 15
KL 14%
QF 7% CX 5% CZ 3%
10
5
EK 23% MH 27%
Other 2%
MH has the largest market share MH PER-KUL-AMS as well as codeshares with KLM AMS via KUL is ~900km shorter than via CAN 25k pax in FY12 to the Netherlands, an increase of 12% YOY 65% of the Perth-Netherlands market are Visitors (Non-Residents) 60% of Visitor arrivals from the Netherlands are for holiday & VFR, remainder for business or employment Average fare of $1,239 equates to a yield of 8.75 US cents/km
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Qantas dominates although market share has declined with increased competition across the Pacific Three quarters of traffic via east coast Australia this is the shortest route LAX via SYD is ~2,400km shorter than via CAN PER-LAX market grew by 9% in FY12 to ~68k pax Australian residents 62% of the total USA market, helped by continued strength of Australian Dollar Perth-LAX has an average fare of $1,498 and strong yield of 10 cents US/km
Source: Department of Immigration and Citizenship (DIAC); AirportIS; Gcmap 16
Tokyo (NRT)
Japan Market Likely to Recover
SQ has the highest market share closely followed by CX both have good connections and frequency 10th largest inbound market & 13th largest overall 51% NRT; 20% KIX; 14% HND; 6% NGO Market 60% inbound visitors High level of business travel Japan is Western Australias second largest trading partner Average PER-NRT fare is $1,318 with a high yield of 16.65 US cents/km Affected by natural disasters & cancellation of QF service May-11 Japan market now all indirect (via SIN & HKG) opportunity for good connections or to capture market share & grow market
History of PER-Japan Market
100 90 80 70 60 50 40 30 20 10 0 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12
Source: Department of Immigration and Citizenship (DIAC)
Pax (000's)
MH 8%
GA 5% D7 4% TG 3% Other 4%
SQ 33%
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Seoul (ICN)
History of PER-Korea Market
Pax (000's)
30
25
MH 9% SQ 18%
QF 9%
D7 5%
KE 5%
GA 5%
20
15
Other 13%
10 5
0
CX 36%
CX has almost half of the market (46%) - good connections via HKG Perth Korea market growth averaged 10% for last 5 years, including 9% growth in FY12 AirportIS shows 95% of pax going to ICN, 5% going to PUS
Immigration data provides country data only and not city/airport data
IATAs AirportIS supplies data based on passenger bookings made via travel agencies and also includes some data provided by airlines AirportIS provides city/airport data based on airline tickets
AirportIS typically understates markets where there is a large proportion of stopover traffic and for low cost carriers In this presentation, city information taken from AirportIS has been grossed-up by the country information from DIAC to better reflect the size of a market
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