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 has been 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), brought 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.
After yesterday’s initial insights from the first day, we provide more key points made by speakers across the full event.
Qantas CEO: Qantas Loyalty is adapting to ‘changing trends’
Qantas CEO Alan Joyce stated its Qantas Loyalty programme is consciously adapting to “changing trends” of customer preferences. Mr Joyce stated 30% of all credit card expenditure is from a Qantas Frequent Flyer credit card. Mr Joyce attributed its success to keeping the programme “ahead of the competition” with the company having to “maintain it”.
Blackmores: We need to offer incentives for customers to book through ‘traditional routes’
Blackmores indirect procurement category manager Simone Gibbs stated: “Traditional hotel offerings are now capped, travellers staying are now booking corporate accommodation through Airbnb, ordering Uber eats and opting to book an Uber instead of a taxi. This means we need to offer customers an incentive to continue booking through traditional routes”.
Rex deputy chairman: ‘tourism loses when you protect airlines’
Regional Express (Rex) deputy chairman John Sharp stated “tourism loses when you protect airlines”. Mr Sharp further noted it is important to “protect” the national economy and “can’t understand” restrictions on operations. He explained that passengers are “very price conscious” with the airline experiencing a decline in passenger numbers “due to a softening in demand”. Mr Sharp stated the carrier is attempting to “educate regional councils” that a “small movement” may have a “dramatic impact” on airfares.
A4ANZ chairman: High cost of passenger services at airports the result of ‘monopolist arrogance’
Airlines for Australia and New Zealand (A4ANZ) chairman Graeme Samuel commented on the costs of airport services, including car parks and F&B, stating: “Why do you pay AUD5.5 (USD3.7) for a coffee at the airport? Because the rent isn’t the same as it is at a Westfield shopping centre. That’s the arrogance of a monopolist”. On Qantas’ ongoing dispute with Perth Airport over landing fees, he said: “The finest pearl of wisdom from the Productivity Commission is if you don’t agree with the arrogance of [airport] monopolists, don’t land there… If you don’t want to land at Perth Airport, get your passengers a train ticket across the Nullarbor”.
American Express Global Commercial Services: Virtual payment creates ‘another layer of costs’
American Express Global Commercial Services VP of global commercial services for Asia Pacific Fady Daher stated virtual payment creates “another layer of costs” as it becomes increasingly fragmented, adding this is an “ongoing challenge”. He noted virtual payment does not have a “seamless” experience end to end “just yet”, though this is expected to change as awareness and efficiencies are improved.
Skyscanner VP: ‘We believe the east and west will converge, it’s all about the rise of technology’
Skyscanner VP commercial Hugh Aitken stated: “We believe the east and west will converge, it’s all about the rise of technology”.
Qantas CEO: A321XLR order ‘could be Qantas or could be Jetstar’
Qantas CEO Alan Joyce stated the group’s order of 36 A321XLRs “could be Qantas or could be Jetstar”. Mr Joyce additionally stated the carrier has so far “not made a call” on aircraft allocation.
Evans and Partners head of research: Consumers are ‘prioritising’ travel experiences
Evans and Partners head of research Cameron MacDonald stated: “The way that the travel market is holding up has been quite remarkable”. Mr MacDonald noted the change in consumption behaviour, stating consumers are “prioritising” travel experiences over household consumer items. Evans and Partners expects the “trend” of experience based travel demand growth to continue, according to Mr MacDonald.
ASPA CEO: Fiji and Vanuatu are ‘totally reliant’ on Australian tourism
Association of South Pacific Airlines (ASPA) CEO and secretary general George Faktaufon stated Fiji and Vanuatu are “totally reliant” on Australian tourism. Mr Faktaufon additionally reported both nations apply different legislation towards air services, with Vanuatu adopting open skies agreements and Fiji airways applying to “protect” the carrier.
Flair Airlines board adviser: Project Sunrise ‘will be a hands down win’ for some passengers
Flair Airlines board adviser Rick Howell said he thinks Qantas’ Project Sunrise “will be a hands down win” for a certain segment of the population. Mr Howell noted some passengers value the ability to simply “get on the aircraft at one end and get off at the other”, while others, such as families travelling with young children, prefer to stopover and have a short break when travelling on ultra long haul journeys. He added that year round demand for nonstop Sydney-New York connectivity exists.
Western Sydney Airport CIO: Drones remains a ‘fuzzy’ area for airports
Western Sydney Airport chief information officer Tom McCormack commented on the latest disruptors and innovations in the aviation industry, stating: “Google is also trialling drones, that you could say is the great fuzzy area for aviation and airports… It’s so dynamic”. Mr McCormack added the airport is confident in state regulator CASA delivering the appropriate drone legislation as technology advances.
4th Dimension Business Travel Consulting general manager: NDC is an ‘opportunity to mix it up’
4th Dimension Business Travel Consulting general manager Felicity Burke stated new distribution capability (NDC) is an “opportunity to mix it up a little bit”. Ms Burke noted NDC provides new offerings for travel policies, with the policies a “key” progress and a “busy time” for the company over.
BP regional head Asia Pacific: We need to focus on base rates rather than add ons
BP regional head Asia Pacific indirect procurement Karina Harris stated: “Base rates are the important part, the dynamics of our travellers is really changing, the Y generation no longer want to stay in their hotel, they want to go out and look at the wonders of the city they’re in, so we really need to focus on base rates as opposed to add ons”.
SITA: Innovation is held back by slower paced developments across cyber security and data privacy
SITA regional director North Asia & Pacific Jay Youlten stated: “Cyber security and data privacy is one of the biggest challenges to innovation… The latest innovations are sometimes held back by the very things we need”. He added: “The organisations that are innovative are the ones that are changing internally… Apple is changing its organisational structure at the peak of its success and I think that’s very brave”.