ANALYSIS: Rivals jockey for position on Kangaroo route

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China Southern is the latest Asian airline to stake a claim on the hotly contested Kangaroo route, as huge change in the dynamics of the market take effect at the end of the month.

The Guangzhou-based carrier is offering Sydney-London fares up to 34 per cent below rivals in an effort to lure connecting traffic over its hub. This follows an announcement that it plans to double Australian flights within the next three years.

Henry He, China Southern's manager for Australia and New Zealand, says his airline is willing to sacrifice profits to gain a place in this key market. "At the beginning of the operation we might lose some money," he admits to Australian media, but he sees this as the price to pay for a presence on the Kangaroo route.

China Southern is well-positioned to offer one-stop flights between Australasia and western Europe With its hub just north of Hong Kong. It has recruited Australian cabin crew to help serve the route. Currently China Southern flies five Airbus A380s and has orders for ten Boeing 787 Dreamliners.

 China Southern: Europe-Australia network (April 2013)

 china southern kangaroo

 Source: Innovata Flightmaps Analytics

China Southern is the most assertive of China's big three airlines in seeking a presence on the Kangaroo route, but the other two could follow. In the past five years the three of them have boosted their Australian presence and tripled their service to Europe. The next step is to link these routes, as China Southern is now doing, so that they can connect over their own hubs and compete with the likes of Singapore Airlines, widely acknowledged as the leading airline in this market.

The Kangaroo route is one of the world's most dynamic, and would likely attract newcomers in any event. But the Qantas-Emirates alliance, which is prompting Qantas to move its European hub from Singapore to Dubai, adds considerable incentive for new carriers. On 31 March Qantas will end its 17-year joint services agreement with British Airways on the route, and in April it will cease all flights to Europe from Singapore and Bangkok. It is also scrapping all European codeshares over Singapore, Hong Kong, Bangkok, and Kuala Lumpur except for Finnair's flight to Helsinki, which Emirates does not serve.

Emirates/Qantas: Europe-Australia network (April 2013)

 emirates qantas kangaroo

 Source: Innovata Flightmaps Analytics

Indonesia's Garuda plans later this year to join six other southeast Asia carriers on the Kangaroo route. The others already exercise sixth freedoms over their home hubs between Australia, New Zealand, or both, and western Europe. Garuda has been steadily adding flights to Australian capital cities from its Jakarta hub, and plans to link these with a new Jakarta-London Gatwick service starting in the fourth quarter with six weekly Boeing 777-300ER flights. This will supplement the Jakarta-Amsterdam route that Garuda already flies.

Cathay Pacific is the Kangaroo route incumbent doing the most to exploit the Qantas move to Dubai. Foremost, Cathay has teamed up with fellow Oneworld member BA in a new alliance designed to replace BA-Qantas joint venture. From 27 June Cathay is also adding a fifth daily Hong Kong-London Heathrow flight, bringing its weekly London frequencies to 35. According to Rupert Hogg, Cathay sales and marketing director, the airline's four daily flights to Sydney and Melbourne will give the airline "huge connectivity" between these Australian gateways and its Hong Kong-London flights.

British Airways/Cathay Pacific: Europe-Australia network (April 2013)

 ba cathay kangaroo

 Source: Innovata Flightmaps Analytics

Equally important, Cathay and British Airways have agreed, subject to regulatory approval, to codeshare between Hong Kong and Australia. Under this deal, BA's twice daily London-Hong Kong flights will connect with Cathay's flights from Hong Kong to Sydney, Melbourne, Adelaide, Perth, Brisbane, and Cairns. This will give BA an Australian presence similar to that it enjoyed with Qantas.

BA's new alliance with Cathay has prompted speculation that BA might withdraw its own metal from Australia. But it is too early to tell if Cathay and BA will gain the antitrust immunity that Qantas and BA enjoyed on the Kangaroo route, and BA insists that it will keep flying its current London-Sydney service via Singapore.

Cathay's other big move is a similar deal with Air New Zealand. The two airlines may belong to different global alliances, but Cathay and Air New Zealand started codesharing on the Auckland-Hong Kong route in early March after competition authorities cleared their deal. As part of this arrangement, Air New Zealand passengers continue from Hong Kong on to London on Cathay, which is leasing Heathrow slots from Air New Zealand for this flight. This is the lease that allows Cathay to add its fifth daily London service in June.

Finally, Qatar and New Zealand expect to conclude negotiations on their first air services bilateral by the end of March. Signs point to an early agreement, with Qatar Airways anxious to add New Zealand to its existing Australian service on the Kangaroo route.

Traffic between Australasia and western Europe is down from previous years, but the jockeying by so many carriers for position on the Kangaroo route suggests that the slump is temporary and they hope to be positioned for its recovery.