The South Pacific aviation market has enjoyed relatively benign operating conditions in the last couple of years, allowing the region’s carriers to record some of its best ever results. Major inbound markets are performing well and bringing solid traffic growth. Against this backdrop, Australia and New Zealand air carriers are exploring the latest aircraft technology, opening up new city pairs, realigning their hubs and reviewing their partnership strategies on key markets such as the Trans Tasman and Trans Pacific.
But as we head deeper into the year, changing macroeconomic conditions, rising fuel prices and growing trade protectionism could cause major headwinds in the industry. What is the outlook for Australia and New Zealand aviation for the medium term and what new dynamics will shape?
CAPA – Centre for Aviation is attempting to address those questions with its Australia Pacific Aviation and Corporate Travel Summit, exploring these issues, as well as the commercial and operational pillars underpinning strategic decision making at local and international carriers.
This event, hosted at the Hyatt Regency Sydney hotel, located adjacent to Darling Harbour in Sydney’s Central Business District (CBD), is bringing together hundreds of aviation and corporate travel executives from airlines, airports and suppliers in what is widely regarded as the largest, pre eminent strategic aviation summit in the South Pacific region.
The first day of the popular event in Sydney has provided some great insights into the state of the industry. Here’s just some of the key points made by speakers during the day’s more than ten hours of sessions, separated for much of the agenda into aviation and corporate travel streams.
Australia is in early stages of ‘major transitional phase’ and will increasingly become an ‘inbound destination, rather than outbound’ destination
CAPA – Centre for Aviation chairman emeritus Peter Harbison stated “Australia is in the early stages of a major transitional phase in aviation expectations, both domestically and internationally. This will require equally substantial re-evaluation of all travel and tourism strategies, barring unexpected events”. He noted that growth “is unlikely to restart before 2022, that is when things will start to change”. According to the CAPA founder, Australia will become an “inbound destination, rather than an outbound”, adding “prices are trending down, and because demand is softening domestic airlines will remain profitable, but will diversify away from ticket sales, fares and routes will stagnate, with more upward pressure on premium fares”. He explained that in 2018, Australia “showed the slowest growth of any significant domestic market in the world, instead of growing with the GDP.” He added: “Market growth has ground to a halt and because the AUD has gone down, we’re less attractive”.
The four megatrends influencing the Qantas strategy
Qantas CEO Alan Joyce stated there are four megatrends influencing the carrier: New centres of demand: Placing a focus on Asia due to its rise in aviation; Digitalisation: How the company is using it to its advantage; Shift in consumer preferences: Adapting to changing preferences, particularly changing preferences by generation Y and Z; Climate change: Adapting and managing risks and may pose. He explained that megatrends and big data are “changing everything we do”. Mr Joyce stated big data allows the group to tailor make its website for individual passenger needs and services, making it “easier” and add value for the passenger while completing the transaction. Mr Joyce further noted “knowing this information can get you to cut through the noise”.
Brisbane Airport: Aviation industry should emulate companies like Apple
Brisbane Airport Corporation aviation development & partnerships executive GM Jim Parashos stated companies like Apple are successful because they offer customers products that customers “don’t even know they want yet” and opined that airlines and airports should embrace this approach. Mr Parashos said aviation industry stakeholders should not automatically accept that passengers will be unwilling to travel on ultra long haul narrowbody aircraft, noting “most mums and dads have no idea what aircraft they are getting on”.
Tourism Australia: We’re targeting high value travellers
Tourism Australia international operations & aviation development manager Trent Banfield stated: “We’re trying hard to break down barriers to make Australia an achievable tourism destination for consumers”. Mr Banfield added: “France is currently the number one country for visitations and Australia is only 40th, which means we aren’t operating with a volume strategy, we just want to get the right visitors and that underpins everything we’re doing at the moment. We’re targeting high value travellers”.
Sydney Airport CEO: Australia should be ‘really ambitious’ in ‘fiercely competitive’ tourism market
Sydney Kingsford Smith Airport CEO Geoff Culbert stated Australia should be “really ambitious” to generate tourism and be competitive in the “fiercely competitive” global tourism market. He said the travel and tourism industry is too fragmented and can do better by speaking with one voice on common issues. Mr Culbert called for a removal of the “barriers” that make Australia “a hard place to visit”, including visa requirements. He said Australia is already hard to get to due to distance and the country cannot afford to make travel more difficult, otherwise airlines and tourists will go elsewhere.
Tourism Western Australia: ‘Demand is over supply’ in Western Australia
Tourism Western Australia director aviation development and policy Claire Werkmeister stated “demand is over supply” in Western Australia as the state “doesn’t have enough seats to bring the visitors in”.
Airbus A321XLR is ‘game changer’ that is ‘reshaping airline route networks’
CAPA – Centre for Aviation chairman emeritus Peter Harbison stated: “The A321neo is a game changer, the A321XLR is reshaping airline route networks because lots of small destinations can now be served point to point. There will be very good growth driven by these aircraft and there are a lot of them coming”. Mr Harbison added the aircraft will “transform Southeast Asian access into Australia”.
NARTA International: Up selling and cross selling between TMC and payment providers is missing
NARTA International head of procurement Jen Barclay stated that one of the services which is missing from TMC and payment solution providers is up selling and cross selling between TMC and payment providers. She added: “Whether it has been requested or not”, the offer should be added. Ms Barclay pointed out that American Express is in an unique position because it provides payment and travel solutions.