Australian domestic air traffic growth stalls as capacity steadies (and the economy slows?)

As the “wealth factor” surrounding the enthusiasm for real estate in a booming housing market starts to wane, a combination of conservative airline capacity and rising air fares has slowed domestic passenger traffic growth to a crawl.

Latest domestic traffic figures from the BITRE show a year-on-year growth rate of only 1% in Jun-2018 – well below the long term average.

For most of Jun-2018, seat numbers exactly tracked Jun-2017’s, just as average fares continue to creep up, along with load factors.

According to the BITRE fares index, the lowest discount fare average in Aug-2017 rose some 8 points over Aug-2017. Full, or restricted economy fares have also risen solidly.

Source: BITRE

On many routes the number of flights and seats was actually down for the month y-o-y, with corresponding slight rises in load factor.

None of this is good news for airports or for tourism, but as the airline majors seek to attain investment status, a stable period of profitability is a relatively unusual occurrence.

For Qantas, another record year likely

Qantas is to report its full year FY2018 financial results tomorrow, 23-Aug-2018.

In May-2018, reporting on its first three quarters of the financial year, Qantas anticipated a full year profit of around AUD1.6 billion, which would be a record result in the airline’s 97 years.

Virgin Australia is also clawing its way back towards profitability as it recovers from the costly fare and capacity wars in the middle of the decade.

Smaller domestic airlines like Alliance Air and Regional Express have meanwhile fared well financially.

For the time being the indicators are sound, but the constant unhelpful turmoil from the political children in Canberra, the end of the housing boom, with mortgage interest rates rising for many, higher fuel prices and erosion of the “wealth factor” suggests we may be sitting on top of the mountain.

From that point, there are only two ways to go: more of the same, or…