George Woods, partner from L.E.K. Consulting and Strategic Advisory Firm, who heads aviation practice in the region, was joined on a panel with 3 aviation experts about the Australian aviation competition in 2021.
- After going through multiple lockdowns because of the COVID-19 pandemic, it looks like travel is beginning to restart.
- While cross-border travel may be still in the future, where are we in the competitive domestic travel market?
- What is the underlying aviation demand from passengers to travel?
Joining Woods for this Australia aviation competition discussion was Cameron McDonald, the head of research at E&P, who brought many years of experience in investment research across his span of E&P, and before that with Deutsche Bank covering the transport sector. Prior to joining that, Cameron was also at Hastings Funds Management as a director and also at UTA where he served on the board at Perth Airport.
Anna Wilson, who is from Frontier Economics, is a specialist microeconomics from across the Pacific and an economist specializing in transport and regulatory issues. She currently heads up the transport practice and brings experience working with clients across the aviation sector in network, regulatory, and market forecasting issues.
Rod Sims, chair of the Australian Competition and Consumer Commission (ACCC), is the longest-serving chair in the ACCC’s history. Prior to that, he was chair of the National Competition Council, and before that had a very successful career as a strategy consultant sitting on multiple boards and also in Canberra as the secretary of PMNC. Read about – or sit back and listen to – what this distinguished panel had to say during this CAPA – Centre for Aviation event:
George Woods:
We’ve got very interesting times ahead of us. We are in normal times sitting on a domestic aviation market that is profitable, that contains the fourth busiest city pair in the world. But the industry has stopped, is in the process of rebuilding, both in terms of the industry where we see VA and Rex restarting or VA restarting and Rex starting their main line business. And where we also see the consumer restarting travelers. They’ve gone through multiple lockdowns.
International borders are shut, and I think most people agree that international travel is a long way away, but we’re starting to see the green shoots in domestic. So in terms of today’s conversation, I thought we might talk around a few things. We might talk around the market and how it’s seeing, and then go into this domestic competitive environment. I might start by asking the panel where they think we are in the recovery. Maybe, Cameron, do you want to give us your thoughts of where you see the aviation market going in the next little while?
Cameron McDonald:
Sure. Thanks, George, and welcome everyone to the session this afternoon. In terms of where I see the market at the moment, and I cover both Qantas and Sydney Airport as a financial investment recommendation. We see the market as being very, very fragile. As you point out, international borders remained closed, international looks as though it’s probably going to remain closed for an extended period of time. And it’s not only just the willingness of airlines to operate or the ability to operate. It’s also the underlying demand environment from passengers. So it won’t just be them willing to get back on a plane, it will also then be things like travel insurance, healthcare, et cetera in the destination market that they’re going to in our view. So we think that’s going to push out the recovery in international markets for an extended period of time.
In the domestic market, there are some green shoots. Again, it’s very, very volatile and we’ve seen state[1]based premiers very quick to lock down borders, in some cases within an hour of notification. So that makes planning of holidays and business travel very, very, very difficult. And you end up probably doing more of this and being on Zoom and virtual meetings from a business perspective. And I think you’ll probably end up seeing a lot more intrastate holiday making than interstate in the short term before we start seeing the benefits of a vaccine being rolled out. So we certainly see some extended challenges for the international market, but some extended challenges and volatile conditions in the domestic market throughout the rest of this calendar year.
