Weekly Roundup of Aviation Space: ACCC, Qantas and AIA in Spotlight

  • Jun 20, 2020 AEST
  • Team Kalkine
Weekly Roundup of Aviation Space: ACCC, Qantas and AIA in Spotlight

Summary

  • Australian Tourism Minister, Simon Birmingham sees tourist-related international travel quite distance off at the moment when Australia has successfully contained COVID-19 spread.
  • Australian government has lately offered substantial powers to ACCC to actively supervise and regularly report on domestic air travel market, especially with regards to its competitiveness.
  • Qantas has commenced contacting its customers entitled to a refund for international or domestic flights cancelled due to coronavirus pandemic.
  • S&P has affirmed Auckland Airport’s long-term corporate credit rating as A- stable, which is considered best for an airport.
  • Sustenance of federal government’s relief package for pandemic-stricken airlines and their employees is instrumental towards revitalisation of domestic travel industry.

While high hopes were attached to commencement of trans-Tasman travel bubble over the next few months, Tourism Minister’s latest statement on prospects of international border closure until 2021 has dashed possibility of the same.

Australian Tourism Minister, Simon Birmingham sees tourist-related international travel quite distance off at the moment when Australia has successfully contained COVID-19 spread.

While execution of travel bubble seems hardly possible in the near-term, the government may allow travel between countries having similar success in containing coronavirus spread, including New Zealand.

Moreover, what’s worth noting is that NZ Foreign Affairs Minister is still maintaining his stance on easy establishment of travel bubble, expected to bring tattered aviation sector back on its feet. While speculations were rife that fresh cases in NZ can act as a setback to potential travel bubble, NZ Foreign Affairs Minister has ruled that possibility too.

In addition to trans-Tasman travel bubble, three other developments in aviation sector caught considerable attention, as discussed below:

ACCC to Keep a Tab on Competition in Airline Market

Australian government has lately offered substantial powers to competition regulator, Australian Competition and Consumer Commission (ACCC) to actively supervise and regularly report on domestic air travel market, especially with regards to its competitiveness.

ACCC would be keeping an eye on any early signs of destruction to competition in the domestic air travel market that can damage consumers’ long-term interests. This would stimulate swift action by ACCC and/or quick transfer of information to the government.

Competition regulator cited an example that the monitoring regime would notify government and ACCC over the rate at which each aircraft is growing capacity on each route, which would offer an insight into whether airline is adding additional flights to harm a competitor or drive them off course.

Monitoring of carriers’ anti-competitive behaviour is expected to ensure healthy competition in aviation sector, wherein airlines try to lure customers via golden schemes to grab market share. For instance, Qantas Airways Limited (ASX:QAN) and Jetstar lately launched $19 flights to entice customers to fly back into air.

Though level of competition varies in Australian aviation sector, Qantas Airways seems to dominate in terms of carrying international passengers, as indicated in below figure:

Check Out Latest Air Travel Stats

As per latest statistics revealed by Department of Infrastructure, Transport, Regional Development and Communications (DITRDC), while Qantas Airways leads in terms of international passenger carriage in April 2020, Qatar Airways had the largest market share of 44.5 per cent in terms of total passenger carriage.

DITRDC’s statistics clearly reflected detrimental effects of coronavirus-induced travel bans on aviation industry, with Australia observing a sharp year-on-year plunge of 98 per cent in international scheduled passenger traffic in April 2020.

Moreover, the nation experienced

 11.3 per cent fall in monthly passenger traffic and 94.6 per cent decline in total seats made available on international scheduled operations to/from Australia in April 2020 over April 2019.

Qantas Initiates Refund Process for Cancelled Flights

Qantas Airways Limited (ASX:QAN) has commenced contacting its customers entitled to a refund for international or domestic flights cancelled due to coronavirus pandemic. The Australian flag carrier has initiated this process in response to concerns raised by ACCC over provision of flight credits to distressed customers instead of cash refunds.

Lately, Qantas has also decided to cancel its international flights until October 2020 on anticipation of closure of international borders till 2021. However, the airline has some flights scheduled in the coming months across Tasman with potential execution of travel bubble between NZ and Australia.

While uncertainty surrounds the resumption of international travel, Qantas is boosting domestic flights with easing restrictions. The airline observed a sharp surge in domestic passenger numbers to 64k this week as against 32k last week.

Besides, Qantas’ budget subsidiary Jetstar recently put 10k seats on sale for $19 across 22 routes in Australia to revitalize from coronavirus crisis.

Qantas is also offering triple points to frequent flyers in order to restore domestic travel. Qantas believes low fares would encourage Aussies to step out and visit family and friends or embark on a travel holiday.

After hitting the bottom in March 2020 when travel restrictions came into existence, QAN has rebounded strongly delivering over 100 per cent return since bottoming out on 19th March 2020.

S&P Affirms Auckland Airport’s Credit Rating

Auckland International Airport Limited (ASX:AIA) has been grabbing substantial attention after S&P affirmed its long-term corporate credit rating as A- stable. The rating reflects Company’s robust liquidity position following equity raise on 6th April 2020, crucial steps taken to lower operating costs and capital expenditure and the covenant waivers.

While Auckland Airport has been able to maintain its top financial rating, the impact of travel restrictions in NZ was evident in its April and May 2020 traffic updates. The airport’s total passenger volumes plummeted by 97.5 per cent in April while 94.7 per cent in May over prior corresponding period.

To strengthen its balance sheet and stay well capitalised during the phase of drastically reduced passenger numbers and strict border controls, the Company undertook equity raising of up to NZD 1.2 billion in April. However, the closure of NZ border from 20th March to all but NZ citizens and permanent residents had a substantial impact on international services.

Akin to Qantas, AIA has also delivered a significant return of over 40 per cent since market crash on 19th March 2020.

While tumbling airport passenger volumes and delay in resumption of international travel remain causes of concern, burgeoning local travel demand and lifting of state border restrictions may revitalize domestic travel industry ahead of schedule. Sustenance of federal government’s relief package for pandemic-stricken airlines and their employees is instrumental towards attaining this objective. However, mounting government debt and fear of second wave of infections need closer attention.

Must Read! Is there Light at the End of Tunnel for International Flights in Australia?

 


Disclaimer
The website https://kalkinemedia.com/au is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) or engage in any investment activity under discussion. We are neither licensed nor qualified to provide investment advice through this platform. All pictures are copyright to their respective owner(s). Kalkinemedia.com does not claim ownership of any of the pictures displayed on this website unless stated otherwise. Some of the images used on this website are taken from the web and are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it below the image.

 

There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.

Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.

As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.

CLICK HERE FOR YOUR FREE REPORT!
   
x
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK