10. Aviation
Vision: Growth in direct flights to Melbourne from
key targeted source markets has made a major contribution to Victoria's
international competitiveness.
Objectives
- Achieve an average growth in international services of between
four and five percent a year over the next five years.
- Maximise the benefits of Melbourne Airport being a 24-hour operation.
- Increase the number of domestic late night services.
BACKGROUND
There is a close link between Victoria's tourism performance and
the capacity and ease of air access to and within Victoria. It is
also recognised that the aviation industry is a dynamic sector,
and many significant changes have taken place in the past two years.
Advances in airline technology, changing trends in booking and travel
patterns, and security are among the major issues influencing airlines'
decision making. These are important factors that need to be considered
in looking ahead to the future of airline servicing in Victoria.
Immediate priorities in aviation are a range of coordinated actions
and marketing initiatives aimed at speeding Victoria's recovery
from the impacts of the September 11, 2001 terrorist attack and
the collapse of Ansett. These coordinated international and domestic
aviation initiatives also need to maintain direct involvement in
shaping aviation policy in Australia.
National
The aviation industry by its very nature is dynamic, and the Australian
domestic sector is no exception. The past five years have been particularly
interesting with the arrival of Impulse Airlines and Virgin Blue,
Qantas purchasing Impulse Airlines less than 12 months after starting
services, and the Ansett collapse.
The trend for Victoria appears to be closer alignment between aircraft
capacity and the number of services flown. Since 1997, aircraft
movements have not grown as rapidly as in the past.
During the next four years Victoria is set to face similar cycles,
although domestic air services and capacity will continue to grow.
Airlines will move towards more cost-effective operations such as
internet bookings and domestic patronage will be pushed along by
international visitors using domestic services during their visit.
While the initial collapse of Ansett in September 2001 caused short-term
difficulties, capacity on trunk route operations has been sustained
to levels that existed prior to this. Qantas has introduced its
Citiflyer program between Sydney, Brisbane and Melbourne
which has Sydney-Melbourne flights operating every half hour and
Brisbane-Melbourne flights every hour during peak times (6am to
8pm). Furthermore, with the use of larger aircraft on these sectors,
overall domestic capacity has been sustained at previous levels.
Virgin Blue has continued to grow rapidly in the Australian market
and flies to all Australian States and Territories. In 20 months
of operation it has grown from two to 16 aircraft, and will be
operating a fleet of 25 during 2003.
Cycles in domestic aviation
This chart demonstrates cycles in domestic aviation, whether they
are periods of extreme growth (1993-1996) or periods of consolidation
(1997-1999).
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While there have been suggestions that the return to a two-airline
aviation industry in Australia will cause fares to increase and
consequently effect tourism, it is worth noting that there is
no other country of Australia's market size supporting more than
two major airlines. It is envisaged that over the next few years
that both Qantas and Virgin Blue will continue to expand their
operations.
In 2000/01, fundamental changes to regional and domestic air servicing
took place. These included the purchase of regional airlines by
trunk route operators as subsidiaries, the launch of operations
by low-cost carriers, a move towards on-line sales by all airlines
and a general trend towards cost-effective domestic travel by all
airlines.
The introduction of low cost domestic carriers will continue to
play a vital role in the national market for many years to come.
The new world of online sales, reduced costs by airlines and consumers
packaging their own product will continue to grow.
While regional air servicing in the past has been hampered by high
costs, the move into new technology is likely to assist new niche
operators into regional centres. While the primary role of providing
feeder services to interstate and international services will remain,
there will be growth in specialist services by niche carriers. Victoria
has already started to witness this, with small operators that previously
operated charter services starting scheduled services following
the demise of Ansett and its subsidiaries.
The growth for Victoria is also likely to come from new air links
which have previously been disregarded. While international airlines
are fully utilising the 24 hour operations of Melbourne Airport,
domestic airlines have so far failed to realise the value of operating
late night services (11pm to 6am) from Victoria, a time which usually
sees over 90% of domestic aircraft laying idle at Australian airports.
The use of aircraft is likely to be on medium/long domestic sectors
such as the Northern Territory and some ports in Queensland, which
currently have few direct services to Melbourne.
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International
A comparison of air services to Victoria in 1995 with the forecast
for 2002 shows the following results:
International Air Services
International air services have increased from an average of 270
inbound and outbound services a week in 1995, to 390 in 2001/02.
This is an average annual growth rate of 6.3%, and a net growth
of 44%.
International Capacity [seats] to Victoria
International seating capacity to Victoria in 1995 was about 80,000
inbound and outbound a week. For 2001/02, the expected seat capacity
will be about 105,000 seats a week. The net increase of 25,000 seats
each week represents an average annual growth rate of 4.6% and a
total growth of 31%.
International air services have grown faster than seat capacity
due to the continuing trend of increased services/frequencies with
smaller capacity aircraft, such as the use of B777 or A340 rather
than B747 equipment.
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ISSUES
Continued market growth is essential to airlines providing new
and increased services to Victoria. A focus on product development
and international markets is essential in creating inbound demand.
With increases in inbound travel direct to Melbourne, airlines
will boost services to cater for demand.
Melbourne is one of many destinations on an airline's network,
and therefore it is essential that Victoria continues to support
the airlines by raising scheduling and operational opportunities
as they arise.
Lack of direct services from North Asia (Taiwan, Korea and North
China) is acting as a deterrent to building visitation from these
markets. However, with the introduction of Qantas's single class
international leisure carrier Australian Airlines in October 2002,
opportunities will exist to establish direct services to these
North Asian markets. It may be possible to re-establish services
to destinations from which Qantas had previously withdrawn such
as India.
Gaps in air services to Victoria compared to New South Wales
and Queensland.
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The key factors arising from Air Services Agreements between Australia
and other destinations include:
- Capacity constraints on China;
- The ability of flights from key Asian destinations to extend
their journey beyond Melbourne; and
- Third party codeshare entitlements on key destinations.
Worldwide confidence in the aviation industry is low. This has
been exacerbated in Australia by the collapse of Ansett. The industry
has been suffering as a consequence of a slow down in the world
economy leading to reduced demand and over capacity. The Centre
for Asia Pacific Aviation estimates the number of airlines worldwide
will decline from 300 to 200.
In addition to a softening demand for air travel there are additional
issues facing the sector, including depreciating world currencies
and rising third party insurance costs.
An increased emphasis on security could lessen the desirability
of the travel experience. Customs and general processing delays
can have an immediate negative impact on the international traveller
and reduce the quality of the visitor's experience.
STRATEGIES
Tourism Victoria's goal on behalf of the industry is to sustain
growth in air services of between four and five percent a year over
the next five years. There are however a number of key links which
work together to provide these outcomes.
- Tourism Victoria will play a leadership role in Commonwealth
regulatory matters affecting aviation, including input to bilateral
negotiations for air rights. This is particularly important for
growth markets that may face restricted growth due to a lack of
air service rights.
- Facilitate government/airline negotiations for expanded or
new air service proposals.
- Continue to work with international airlines that serve North
Asia (Taiwan, Korea and North China), to secure direct services.
Where there are no direct services into Victoria, work will
be undertaken with international airlines that provide international
tourists with the best possible access to Victoria.
- Facilitating seasonal air charters by foreign carriers.
- Facilitating commercial agreements to increase the competitiveness
of the Melbourne sector to foreign and Australian carriers.
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