Demand for interstate travel can jump start airline recovery

first_imgDemand for interstate travel can jump start airline recovery Australia’s commercial airlines are operating at a fraction of their pre-COVID-19 capacity but there is growing optimism within the industry as demand for interstate travel increases.The ACCC’s second Airline Competition in Australia report, released today, shows total passenger numbers for the month of September 2020 were 87 per cent lower than September last year, and airline industry revenues were commensurately lower.However, with signs that all states now have COVID-19 under some control, and with key domestic borders opening up, airlines are increasing capacity to meet pent-up travel demand.“COVID-19 has created some of the most difficult market conditions in Australian aviation history but we are beginning to see cautious optimism among airlines about increasing passenger numbers in the months ahead,” ACCC Chair Rod Sims said.“The bulk of the flying in Australia this year has been within states, mainly in Queensland and Western Australia. But with borders now re-opened, interstate travel will start to look more like it did pre-COVID, particularly with the return of the all-important Sydney-Melbourne-Brisbane golden triangle routes.”“Although the international border will remain closed for the foreseeable future, the demand for domestic holiday and family-reunification travel is expected to drive recovery,” Mr Sims said.“We are mindful that the industry’s optimism is necessarily cautious and the path to recovery is fragile, as we saw with new COVID-19 cases in South Australia during November.”Qantas and Rex gained market share in September at the expense of Virgin, but the report notes the three main carriers’ share of passengers may be volatile given the depressed state of the industry.“We expect airlines’ market shares will move around a bit in the short term as the industry continues operating at reduced capacity. At this stage, it is difficult to know exactly how competition will evolve as the industry emerges from this period,” Mr Sims said.The report outlines a number of significant developments in the airline industry in recent months, including the finalisation of the sale of Virgin to Bain Capital. Virgin has announced plans to position itself as a mid-market carrier with a business product, although several aspects of its service offering are currently under review.“As Australia’s second largest airline, Bain’s direction for Virgin will likely have major implications for competition in the domestic airline industry,” Mr Sims said.Regional operator Rex has further progressed its plans to expand into major domestic routes, and its services between Sydney and Melbourne are due to commence from 1 March 2021.One of the key inputs Rex will need to compete on capital city routes is access to take-off and landing slots. Rex has secured slots for its launch in March 2021, and is working on slots for the next season from April 2021. The Australian Government has initiated a review of demand management at Sydney (Kingsford Smith) Airport and the report includes an overview of the ACCC’s submission to this review.“A fundamental objective of any reform to the existing slot management scheme at Sydney Airport should be to ensure that the allocation results in the most efficient use of slots, and fosters an environment of robust competition between airlines,” Mr Sims said.“With airlines beginning to increase their operations, we will continue to monitor the industry and watch out for signs that competition is being stifled in any way, such as through the inability to access slots at Sydney Airport.”Australian domestic air services – September 2019 to September 2020Source: Bureau of Infrastructure, Transport and Regional Economics; Australian domestic airline activity.Note: Data is for regular public transport (i.e. commercial flight operations on fixed schedules and specific routes available to the general public) and does not include charter operations.Busiest routes by monthly capacity – September 2019 and September 2020 Source: Data collected by ACCC from Qantas, Virgin Australia and Rex.BackgroundOn 19 June 2020, the ACCC was directed by the Treasurer, The Hon Josh Frydenberg MP to monitor the prices, costs and profits of Australia’s domestic airline industry and provide quarterly reports to inform Government policy. This report is the second under the Treasurer’s direction.The direction under Part VIIA of the Competition and Consumer Act enables the ACCC to require information from relevant companies. The direction is for three years. /Public Release. This material comes from the originating organization and may be of a point-in-time nature, edited for clarity, style and length. View in full here. Why?Well, unlike many news organisations, we have no sponsors, no corporate or ideological interests. We don’t put up a paywall – we believe in free access to information of public interest. Media ownership in Australia is one of the most concentrated in the world (Learn more). Since the trend of consolidation is and has historically been upward, fewer and fewer individuals or organizations control increasing shares of the mass media in our country. According to independent assessment, about 98% of the media sector is held by three conglomerates. 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