January 26, 2015

Major boost for Australian and Chinese airlines with new air services agreement

After nearly ten years of discussions, Australia’s Prime Minister Tony Abbott and China’s President Xi Jinping concluded negotiations for a China-Australia Free Trade Agreement (ChAFTA) on 17th November 2014. The Australian Trade and Investment Minister Andrew Robb and Commerce Minister Gao Hucheng signed a Declaration of Intent to work towards signature of the Agreement. ChAFTA creating the historic foundation for a new phase of Australia’s economic relationship with China. ChAFTA unlocked significant opportunities for Australia as China is Australia’s largest export market for services and goods. It accounts for over 30% of all exports, and is a growing source of foreign investment.
China and Australia have now established an air services agreement which has massive repercussions for the airline industry. In the last financial year approaching 800,000 Chinese tourists spent AU$5bn (US$4bn). On the reverse side of this, part of ChAFTA has seen the Chinese government guaranteed that Australian service suppliers can now construct, renovate and operate wholly Australian-owned hotels and restaurants in China. Additionally Australian travel agencies/tour operators can establish wholly Australian-owned subsidiaries in China offering tours throughout China for both domestic and foreign travelers.
“Last year, 100 million Chinese travelled abroad, and this is set to double to some 200 million by 2020,” Andrew Robb, Australia’s Trade and Investment Minister said, continuing, “Tripling aviation capacity from China into Australia over the next two years will ensure we are well placed to capture this growth.” This becomes feasible as a consequence of this new agreement which allows both countries’ carriers to immediately add 4,000 extra seats a week between Australia’s gateway cities and Beijing, Shanghai and Guangzhou, with a further 7,000 seats being phased in over the following two years.
Traffic rights for airlines to fly beyond the two countries by October 2016 now paves the way for new routes while allowing airlines from both countries identical increases in capacity between other gateway cities besides Beijing, Shanghai and Guangzhou, though unlimited current passenger services between China and Australian Cairns, the Gold Coast, Adelaide and Darwin will continue. It is also important to note that this new agreement additionally eliminates the requirement for Chinese government approval of airfares.



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