Virgin Australia's selection of Brisbane as its operations centre raises questions about the airline's strategy and revives the debate over airport terminal access.
Brisbane is the smallest of Australia's three big cities and it handles the smallest share of their air traffic. Statistics show that 51% of all domestic passengers pass through Sydney Airport, 44% go through Melbourne, while 26% use Brisbane. The disparity is even higher in terms of high yield business traffic.
Queensland's state government, based in Brisbane, offered Virgin more incentives and start-up help than did Sydney or Melbourne, but Brisbane is still on the edge of Australia's busiest air travel markets. One explanation for Virgin's choice is that it may plan to focus less on domestic traffic and more on international feed. Brisbane is well suited geographically for that.
Brisbane would also have been the hands-on favourite from the standpoint of terminal access. Among Australia's big three, it offers the only airport terminal with an entire common user wing for new airlines.
Melbourne has recognised the shortcomings of its terminal and is moving ahead with plans for a common user facility. It will start construction in April with the goal of opening before Virgin's July launch.
Melbourne also has decided to pay for the A$8 million ($5 million) terminal itself. It will ask new airlines for two-year operating guarantees, but otherwise impose only standard use charges. The guarantee is to ensure payment of a liquidated sum if an airline stops flying within its first two years. The airport says the guarantee is designed to protect Melbourne if "we were left with a terminal and no tenant". Virgin and Impulse Air are the most likely users of Melbourne's terminal.
Meanwhile, the introduction of new services by three domestic airlines should be credit positive for Australian airports, according to a new report.
The report, from credit rating agency Moody's Investors Services, sees the probable growth in passenger numbers and the diversification of carrier bases as positive news for the airports.
However, the report adds that the need for increased capital expenditure to accommodate these new services provides a challenge in the near term.
Source: Airline Business
