Aviation – COVID Recovery: Australian airlines remain hopeful that high vaccination rates and regional routes will assist the industry to recover
Market Insight 24 February 2022 24 February 2022
The second article in our “Aviation – COVID Recovery” series considers the recovery path for Australia’s domestic airline industry, including the increasing focus on regional routes, the announcement of a new low-cost airline, and the Government’s strategic priorities for the industry in the medium term.
As state and territory borders continue to open and Australia makes its way through the traditional busy summer season, airlines remain hopeful that domestic travel in Australia can recover despite the challenges of the COVID-19 Omicron variant.
The recent ACCC report on Airline Competition in Australia reported that the Australian airline industry has accumulated over $4 billion in losses over the last decade, with the vast majority incurred in recent years resulting from the effects of COVID-19 and border closures. It is predicted that these losses would have been larger if not for the funding provided by the Australian Government to assist airlines through the pandemic.
To assist in its recovery, the industry has called for more consistency across jurisdictions to allow airlines to operate more efficiently, as passengers and crew are currently still subject to different health orders, testing requirements, and quarantine mandates across the states and territories despite the country’s high vaccination rates.
As it remains unclear how the Omicron variant, and likely future variants, will impact upon the financial recovery of the airline market globally, airlines such as Qantas and Jetstar have shifted their focus to creating new domestic routes with regional centres benefiting from the new direct connections, providing greater options for consumers. This follows on from the announcement of the new low-cost airline Bonza, which is set to launch in 2022. Bonza hopes to encourage travel to regional destinations by flying more than 50% of their flights to routes not currently operated by other carriers, creating more competition amongst airlines.
That said, domestic challenges do remain. They include funding shortfalls and inconsistencies, infrastructure development (particularly in the context of long term sustainability goals), the loss of trained and qualified aviation personnel, and airspace systems to balance the needs of commercial airlines and the expected proliferation of users of emerging technologies in aviation such as drones.
In December 2021 the Australian Government released an ‘Aviation Recovery Framework’ outlining a set of strategic priorities designed to meet these challenges and support the industry’s recovery over the next three years. The framework particularly focuses on regional and remote areas, and the general aviation industry, which is to be welcomed. However, with other issues at the forefront in an election year, there is a concern about the extent to which this plan will lead to real, practical reform, or whether it merely serves as an aspirational, but ultimately unfulfilled, statement of intent.
Read our first article in the series: Aviation – COVID Recovery: The aviation industry’s emergence from Covid: An environmental turning point? (link to this Aviation – Covid Recovery: The aviation industry’s emergence from Covid: An environmental turning po : Clyde & Co (clydeco.com))