Reece

The official Dept of Transport & Communications figures (refer Airline Affairs) tell the story in stark terms. The June ’89 quarter was the fourth consecutive quarter in which Revenue Passenger Kilometers (RPK) fell. June ’89 in fact represented a fall in domestic traffic of a whopping 20% over the peak quarter (Sept) of 1988. While last Spring represented a virtual ‘Golden Age of Tourism’ in that Expo and Bicentennial traffic were at their strongest, to have a 20% downturn in less than a year is something to take very seriously indeed. The number of passengers uplifted also declined by 6. 7% in the June ’89 quarter as against the previous June.

Other factors of significance to contribute to the overall decline was the protracted threat of industrial strife at Ansett through last October/November and the ongoing ATC delays at KSA and, to a lesser extent Tullamarine, through the first half of 1989. Both events ensure that people simply look to alternative forms of transportation wherever possible – it’s as simple as that! The leisure traveller doesn’t want to be stranded by a possible strike while even the business traveller can in the end scrub a few trips from his schedule where flight delays and cancellations render flying a non viable option when the fax and phone can speedily do the job in the short term.

Inbound tourism is also naturally down and while this was expected by any thinking person within the industry, it is still a contributing factor when aligned with the two previously mentioned causes plus the spectre of an economic downturn and resultant tight personal spending. For the first six months of 1989 inbound tourism was down almost 10% against 1988 with the largest falls being from the US and New Zealand. Europe was static while strong growth was fortunately still being logged from the UK, Asia and Japan. Overall year end growth is said to be in the region of 9%, against an al. most dizzy 26% for 1988. While this is still a good result, in real terms it will be needed to continue at this rate for several years to come if it is to even take up just some of the slack from a drastically reduced domestic uplift.

For the airline environment in· Australia, this emerging spectre of recession represents something that many of the industry’s newer executives have little real experience of. It was back in the early eighties that we had our last recession, indeed the single greatest economic decline· since WW2. Nowadays, with deregulation barely a year away, airlines both big and small must be closely examining their tactics to ensure they don’t become victims of a downturn that is beyond their control.

Today though our major carriers are all much better off operationally than they were back in 1981. In that year both domestics were wading into the market with wide body equipment, just at a time when they least needed it. In fact, it took the then TAA more than five years after initial service entry to get their A300 fleet fully profitable while Ansett was able to at least defer delivery of its 767s for nearly two years to ride out much of the downturn.

Nowadays the situation is entirely different. Both domestics have a large and mixed fleet of modern (ie: low maintenance costs) twinjets which, in the case of the 737-300, burn up to 70% less fuel per flight hour than the 727 trijet that they largely replaced in numerical terms. Conversely Ansett’s 767s cost little more to operate than a 727 yet carry up to 60 more passengers plus a mountain of freight. This is important as traffic in the June ’89 quarter reflected the levels of 1986 and early ’87. As even that will ably take care of good peak primary route loadings on the wide bodies then the domestics should still be able to keep these fine aeroplanes well utilised. Similarly the new 737s and A320s also arewell sized for a downturn and with their natural traits of long range (in comparison with 727s and DC-9s) will be able to fulfil many missions once only the domain of the more !3xpensive larger·aircraft and its often uneconomic payload.

Qantas meanwhile sees constant growth ahead via the very strong overall position of Australia as a tourism destination of international interest. The flying kangaroo also nowadays has a great asset in its mixed fl!3et of 210, 250 and up to 400 passenger 767 and 747jets, all with long legs and capable of operating far more efficiently that the 747-only fleet that QF was drastically hampered by during the first half of this decade.

For the new entrants though, an economic downturn is the last thing they need and consequently one must honestly question the mania for chasing a November 1 start-up date. Lack of ability to harness the necessary finance has already scuttled ‘the efforts of Capitol Airlines, while Brian Grey’s Compass Airlines is taking longer to raise its $85m base than was originally anticipated, largely as a result of the overall tightening of finance through the investment community.

Compass is also in a situation where if it chases the Nov 1 start up date, it may be forced to operate larger aircraft (290 pax A300s v 230 pax A310s) than planned. The reason for this is principally that due to the massive order backlog, the A300 is available much sooner to Compass than the smaller A31O. If a recession is in full swing come next November, then the requirement to attract such consistently high load factors to su·pport an all economy deep discount fare operation via an ultra large aircraft is something . that could well represent a fiscal nightmare. We certainly wish Brian luck but wonder if it might be better to delay entry to this cut throat market called aviation till the economy is on a: more positive course.

Traffic IS turning down, let us hope it doesn’t fall any further. Certairly a long-term resolution to Sydney’s ATC problems will assist greatly while any strike action by flight crews in the year ahead will do us all much damage – we sincerely hope those concerned weigh their options carefully and consider the true long-term consequences of what a strike would mean to the entire industry at a time of negative growth