Like most markets around the world, Australia’s domestic market has been volatile through most of 2020, as borders have closed and opened. It appears to be heading back towards some degree of normalcy, although recent experience shows COVID-19 cannot be counted out so easily. It will take the successful delivery of vaccine programmes to give more certainty that the airlines have fully moved beyond the problems of 2020.
This year should bring good options for local consumers. Virgin Australia has emerged from administration in a stronger position and a renewed commitment to defending its market share. Qantas and Jetstar will likely be equally as aggressive, and newcomer Regional Express (Rex) will be fighting for its place in the sun.
For the first part of 2021 the domestic market will be the only battlefield for the Australian carriers with international flying still blocked by strict travel restrictions. The question remains, will there be enough traffic to sustain all local carriers, especially with Rex’s ambitious plans on Australia’s major routes including Sydney-Melbourne.
This was the main topic of debate among a panel of local experts during the Feb-2021 edition of CAPA Live – a monthly virtual summit, offering insights, information, data and live interviews with airline CEOs and industry executives across a next-gen virtual event platform. The discussions between L.E.K Consulting, partner, George Woods; Australian Competition and Consumer Commission (ACCC), chairman, Rod Sims; E&P, managing director – head of research, Cameron McDonald; and Frontier Economics, economist, Anna Wilson provided some enlightening insights into the subject.
The ACCC has a range of compliance and enforcement priorities for 2021, a number of which relate to consumer and competition issues arising from the coronavirus pandemic. Its ‘COVID-19 Enforcement Taskforce’ continues to closely monitor forward sales practices by travel businesses, noting concerns about misrepresentations in advertising and marketing material targeted at consumers.
According to Mr Sims, competition in the aviation industry remains fragile, and the ACCC would be scrutinising behaviour that could further damage competition. Mr Sims explained, the ACCC will, for example, “be closely monitoring the plans” by Rex to enter the major domestic routes, with a particular focus on “Rex’s ability to access slots at Sydney Airport”.
Mr Sims described Rex as “a slightly different beast than others that have tried to be the third or indeed second player” in Australia’s airline industry, adding “they’re as well placed, or probably better placed than anyone else who’s tried to pull it off”.
Anna Wilson, of microeconomics consultancy, Frontier Economics, stated the impact of the coronavirus pandemic on air travel in Australia could provide new or expanding entrants with an advantage because “everything’s up in the air… All the cards have been thrown into the air, and you have an opportunity to think about how you might restructure a network, what might be most efficient”.
E&P’s Cameron McDonald, acknowledged that “there are some green shoots” for the recovery of domestic air travel in Australia, but noted: “It’s very, very volatile and we’ve seen state-based premiers very quick to lock down borders, in some cases within an hour of notification”. This volatility and unpredictability “makes planning of holidays and business travel very, very, very difficult,” he said.
Frontier Economics’ Anna Wilson noted though that the desire to “start winning work for different businesses and expanding” will help drive recovery of demand for corporate air travel. “There’s an aspect of business which doesn’t do well” relying on videoconferencing “and that’s winning new business,” she said. “Face-to-face interaction is actually critical” for businesses trying to secure new clients, customers and contracts – “you don’t remember people that you’ve met on a Zoom call, but you do when you’ve met them face-to-face,” she added.
You can watch the CAPA Live discussion in full, or view the session transcript here: