Northern Gateway

Darwin is one of three airports owned by Northern Territory Airports, along with Alice Springs and Tennant Creek. Of the $80 million revenue generated by the parent company, Airport Development Group (ADG) in the 2012 financial year, 80 per cent was earned by DIA.

DIA is a joint civil-military airport. The RAAF is responsible for major airside assets including the runway and main taxiways. It also provides air traffic control services.

A cost-sharing arrangement exists between ADG and Defence to pay for existing and future use of the runway and taxiways.

As Ian Kew, CEO of ADG, says: “The arrangement with Defence has enabled the city of Darwin to have outstanding airport facilities, considering its population of only 130,000 people. ” ADG leases 311 hectares of land from the Commonwealth to provide services to civilian airlines and passengers. This area includes parking aprons, terminal facilities and support infrastructure such as hangars.

From a Defence perspective, Darwin is used as a forward deployment base. It has a large army presence in the area at Roberston Barracks. The largest military aircraft presence is located at RAAF Tindal situated near Katherine, 320km southeast of Darwin.

Darwin has an emerging United States Marine Corps presence. In the past year 250 Marines cameDarwin to undertake military exercises. This number will increase to 1,100 troops in 2014, with numbers to ultimately reach 2,500. The rate of troop growth is governed by the construction of buildings and other facilities to cater for these military needs. During the past year US Marine Osprey tiltrotors were involved in undertaking trial medevac exercises.

In addition to the US Marines, Darwin regularly hosts multinational military exercises such as Pitch Black and Talisman Sabre.

DIA had 2. 25 million passengers during FY2012. This figure represented a decline of 3. 1 per cent from the previous year. As with many Australian destinations, the fall in patronage was attributable to the high value of the Australian dollar making Darwin a less attractive holiday destination for domestic travellers.

Statistics for FY2013 indicate a rebound with domestic passengers increasing by two per cent and international up 17 per cent, year-on-year.

Despite the drop in passenger numbers in FY2012, ADG revenue increased by seven per cent. This increase was attributable to improved retail earnings, increased ground transport revenue and contracted rate increases with airlines. Aeronautical revenue still accounts for 65 per cent of total ADG revenue. However, investment in a new terminal building, including an overhaul of retail and duty free space, should see a proportionate increase in non-aeronautical revenue.

The Northern Territory is in the early stages of a resources growth cycle, with development of the INPEX LNG facility being the most prominent. This development presents challenges to the ongoing growth of DIA. Similar to the Western Australia experience, thecommencement of development activities has been accompanied by higher airfares, sharp increases in the cost of accommodation and higher wage costs. While business travel has increased, combined with the high Australian dollar, there is difficulty in growing domestic passenger numbers.

The emergence of the resources sector has not resulted in a significant expansion of domestic services into Darwin. So far, increased demand is largely being catered for within existing airline schedules. Through meeting demand on existing services it has enabled airlines to increase airfares.

To meet these challenges, Northern Territory Airports has actively marketed the airport to attract domestic and international passengers. The strategy to generate passenger growth involves establishing DIA as a hub for northern Australian travellers to Asia. Kew explains.

“We want to establish Darwin Airport as the primary gateway that links northern Australia cities to international destinations. At the moment passengers originating from cities like Port Hedland, Karratha, Townsville and sometimes Cairns need to use Brisbane or Perth to link with international services to Asia. This means passengers need to head south before getting onboard connecting north-bound flights. It wastes the time of the passengers and in some cases increases the cost of their airfares. ” The marketing program involves a collaborative association between Northern Territory Airports and Airnorth. A campaign is currently being undertaken to attract passengers originating from North Queensland. It involves a television campaign and engagement via social media.

Airnorth is a key partner to Northern Territory Airports in the

Our goal is to provide seamless domestic and international travel.

development of these northern Australia air routes. Kew says: “We are using our relationship with Airnorth to co-brand Darwin as a gateway or hub location. By working together we are able to strengthen Airnorth’s domestic services to DIA. These services bring passengers to DIA where we undertake international passenger processing, before they board onward international services to Asia. Our goal is to provide seamless domestic and international travel.

“One of the advantages of DIA is the close proximity of the international and domestic passenger facilities. At Darwin, passengers only need to travel 40m to transfer from domestic to international facilities. In comparison, domestic passengers transferring to international services at Perth need to travel to another terminal on the opposite side of the airport. At Brisbane passengers need to use public transport to reach a different terminal building,” Kew said.

“Early signs from our marketing strategy are encouraging. Airlines are excited about the potential of a gateway hub at DIA. ” Northern Territory Airports is proactive in seeking new international services as well as adopting measures to retain existing airlines.

“It is essential to work hand in hand with airlines to build sustainable services,” Ian Kew explains. “In the first instance we seek to create a relationship with the airlines so they are willing to engage in meaningful commercial and operational discussions about introducing new services. We seek to understand the service drivers of potential airlines that may consider Darwin as a destination. This provides the framework for us to develop a business case for an air service to Darwin. “The business case is prepared from the airline perspective, not Northern Territory Airports. It involves us creating financial models about aircraft operations and profitability. ” Importantly Northern Territory Airports seeks to provide some financial protection over operating costs while an airline service finds its feet, providing some relief on passenger charges during the first year of operation. The Northern Territory government provides some incentive support for the same initial operating period. Northern Territory Airports also undertakes marketing activity around the introduction of new services, particularly through the use of various forms of social media.

In the past 18 months DIA has seen the number of international carriers grow from two (Jetstar and Airnorth) to six. The four new airlines include SilkAir, Philippine Airlines, Malaysia Airlines and AirAsia.

Malaysia Airlines recommenced services after an 11-year gap. Of particular note are the new services provided by full-service carriers Philippine Airlines, SilkAir and Malaysia Airlines, which point to the confidence of airlines in the growth of business travel associated with the resources sector.

Kew notes while market potential is important in attracting new airline services, the availability of aircraft of suitable size in the airline fleet is also a key factor. In the case of DIA this means the availability of narrowbody 737-800 and A320 aircraft.

During FY2012 DIA served approximately 430,000 international passengers – or 19 per cent of total passengers. Additional aircraft have seen international seat capacity increase by 35 per cent.

In early December, Jetstar announced the closure of its base in Darwin, resulting in 93 airline staffbeing transferred to other locations. Three A320 aircraft situated at Darwin will be transferred to Adelaide.

Jetstar has also reduced the number of services from 54 to 49 per week as part of measures initiated by its parent company to reduce costs. Services to Manila have been suspended while the number of services to Bali, Singapore and Brisbane have reduced. At the same time, Jetstar has increased services to Cairns. The net effective of these services changes is a modest reduction of 3. 5% in the overall seat capacity at Darwin Airport.

These Jetstar service changes are probably resultant from the increased airline competition at Darwin. When Jetstar commenced services at Darwin they held a dominant market position. Now they need to compete internationally with Air Asia X, Philippine Airlines and SilkAir.

Domestically TigerAir is increasing services to Darwin, announcing in early December daily flights to Brisbane.

In the next three years Northern Territory Airports will invest more than $70 million in airport infrastructure to cater for existing and future needs. The most significant investment is $65 million on the terminal building. This development will double peak-hour passenger handling capacity. A further $10m will be spent by airlines to undertake their own fitout requirements including new business lounges for Virgin and Qantas.

Airside developments include the construction of five additional helipads plus three parking bays to take the total number to 17. The demands of the resources sector are likely to result in higher levels of construction for airport infrastructure in the short to medium term.