Competitive marketplace
New players continue to enter Oceania markets as countries in the region expand air services agreements. Australia and the United States signed an open skies agreement in 2008 and the number of carriers in the trans-Pacific market promptly expanded. Recent entrants into Australian international markets include several Middle East carriers, young low-cost long-haul operators like V Australia and AirAsia X, and Delta Air Lines. This additional capacity, coupled with the worldwide decline in premium demand, has weakened yields in international markets. Expanding LCC operations in Australia and New Zealand are compressing profits in domestic markets as well. Carriers with low costs and minimal premium services are faring best in the current economic environment, and traditional carriers are working hard to streamline their businesses.
Future potential
While today's challenges are considerable, the future potential of the Oceania commercial air market is great. Air travel growth is forecast to average 5.1 percent per year over the next 20 years, slightly higher than the world average. Air transport is fundamental to tourism and international trade, major drivers of the region's economy. New, efficient single-aisle airplanes on order by the region's airlines will support continued expansion of LCC operations. New mid-size twin-aisle airplanes with increased range will enable airlines to open more direct markets. North America, China and Middle East routes will gradually gain market share against today's dominant intra-Oceania market.
The greatest incremental traffic growth will be between Oceania and Southeast Asia. By 2028, air traffic in this market will nearly equal traffic within Oceania, thanks to fewer air service regulations, new trade agreements and Southeast Asia's prime location as a connecting point to Europe. In February 2009, ASEAN, Australia and New Zealand signed a free trade agreement that will strengthen commercial ties among the participating countries. Europe continues to be an important economic partner for the countries in Oceania, with strong markets for tourism, services and commercial goods, reinforced by cultural, political and person-to-person ties. New Zealand is in negotiations with the European Union to develop a full air services agreement with all member states. New Zealand also signed an open skies agreement with Canada in July 2009, which will lift restrictions on frequencies in this market.
