LONDON – It’s a deep-rooted déjà vu. Australia closes its borders and Qantas is forced to sever ties with the outside world, causing a role reversal. According to recent figures, Air New Zealand is the first international airline for passengers carried to/from Australia as a result of the trans-Tasman travel bubble, now suspended amid a surge in COVID-19 cases.
The situation in Australia has become Kafkaesque due to the new restrictions that came into effect in July that allows weekly access to around 3,500 passengers, half of those who could access in June. The government announcement crushed the hopes of 34,000 Australians who have registered with the Department of Foreign Affairs and Trade as being stuck overseas and wanting to come home. From Sydney, for instance, Australia capped the number of passengers allowed into the country to 1,505 passengers each week.
The travel bubble has also been suspended for at least eight weeks. The agreement provides for two-way quarantine-free travel that allows airlines and airports to operate flights between New Zealand and approved safe travel zone destinations without the requirement of quarantine on arrival as set by local governments (Air New Zealand, 2021). Now the fate of Australian citizens stranded abroad will depend on the spread of the virus.
The surge in COVID-19 cases impacts recovery in demand
In a press conference in June, Qantas CEO Alan Joyce had stated that he was “optimistic about the domestic market,” contrary to the long haul which “will take a long time to recover” (ABC, 2021). In April 2021, 45 international airlines operated scheduled services to/from Australia, with international passenger traffic down 96.8 per cent in the corresponding month in 2019 (BITRE, 2021).
Following the emergence of a new strain of the virus in mid-July (Ray, 2021), Australian authorities were forced to reintroduce restrictive measures including mini-lockdowns in the worst-hit regions. American Airlines has become the first airline to have suspended the LA-Sydney link from 1st August until 29th October (Thorn, 2021).
Also, the application of the rules isn’t homogeneous, and Qantas’ CEO short-haul forecasts could be said to be disregarded. As reported by the Department of Health, each Australian state requires different procedures (Department of Health, 2021), which have forced Qantas to cancel almost all domestic flights and to announce the furlough of 2,500 employees for at least two months (Visontay, 2021).
To prevent colossal losses, the federal government has extended financial assistance measures for domestic carriers (Chua, 2021). It has also pledged to fund more repatriation flights operated by Qantas’ 787 Dreamliners (Thorn, 2021). Additionally, South Australia is expected to host a two-week trial of home quarantine for vaccinated arrivals into the country, to determine whether the risks of infection are the same as for the hotel (Thorn, 2021).
Air New Zealand becomes Australia’s biggest international airline
The suspension of all international flights by Qantas and Virgin Australia, helped Air New Zealand to emerge as Australia’s biggest international carrier, Department of Transport reveals. In May 2021 the Kiwi flag carrier was responsible for 49 per cent of all international passengers arriving or departing from Australia compared with just 22.6 per cent for Qantas (BITRE, 2021).
Now, given the current suspension of the trans-Tasman bubble, the airline has lowered its earnings guidance for the current financial year expecting a loss before taxes of not more than NZ$530 million for FY22, compared to NZ$450 million loss in the previous guidance (Ngai, 2021).
“Demand is going to fall away pretty quickly across the Tasman both ways. So, we’ll make the adjustments there and we’re putting on some extra activity domestically.” Air New Zealand chief executive Greg Foran told radio RNZ. “Domestic is continuing to perform well, we’re now actually running above pre-Covid levels, we’re running at about 104 percent” (RNZ, 2021).
A shift in passenger behaviour
Meanwhile, the trend to invest in people who may have been away from home for a long time is making its way. An analysis by Ad Age reads that travel companies have started spending again on advertising, but have changed their focus (Pasquarelli, 2021). While ads were previously informative, they have now taken on a persuasive character. As a result, the message has been around families and gathering people together who have been apart due to the pandemic.
Nonetheless, the Australian scenario is one of a kind. The rules outlined by the government don’t allow travel for tourism and the repatriation of residents remains extremely restricted. Undoubtedly, however, Qantas’ strategy should be based on the needs of people, now more than ever.
Lastly, the image of grounded aircraft at Alice Springs Airport (Northern Territory) should lead to a deep reflection on the future of aviation.
Hong Kong’s flag carrier Cathay Pacific has most of its 777s stored in the Australian desert. There are also planes from Singapore-Scoot, Cebu Pacific, HK Express and others, Planespotters shows (Planespotters.net, 2021). The recovery doesn’t go through slogans. Even with an unlikely surge in demand, the many parked aircraft prevent an immediate recovery of operations. And even if that happens, airlines won’t be able to write off their losses and return to pre-Covid levels for at least another five to six years, starting now. Ground zero.
ABC News. (2021). Qantas CEO Alan Joyce announces thousands of job losses as part of coronavirus recovery. https://www.youtube.com/watch?v=3yoKC5qK820&t=768s
Air New Zealand. (2021). Trans-Tasman Travel Bubble: What You Need to Know. https://www.airnewzealand.com.au/trans-tasman-bubble
Bureau of Infrastructure and Transport Research Economics (BITRE). (2021). International airline activity – May 2021. https://www.bitre.gov.au/sites/default/files/documents/international_airline_activity_0521.pdf
Chua, A. (2021). Australia extends financial relief for airlines. Flight Global. https://www.flightglobal.com/air-transport/australia-extends-financial-relief-for-airlines/144877.article
Department of Health. (2021). Coronavirus (COVID-19) domestic travel restrictions and remote area access. https://www.health.gov.au/news/health-alerts/novel-coronavirus-2019-ncov-health-alert/coronavirus-covid-19-restrictions/coronavirus-covid-19-domestic-travel-restrictions-and-remote-area-access
Ngai, S. (2021). Air New Zealand expects bigger loss due to trans-Tasman impact. www.cirium.com
Pasquarelli, A. (2021). Travel Brands Are Spending Again – How Their Marketing Strategies Are Different. Ad Age. https://www.studioid.com/springboard/trends/travel-brands-are-spending-again-how-their-marketing-strategies-are-different/
Planespotters.net. (2021). Cathay Pacific Fleet Details and History. https://www.planespotters.net/airline/Cathay-Pacific
Radio New Zealand (RNZ). (2021). Air New Zealand ‘willing and able’ to increase flights from Australia. https://www.rnz.co.nz/news/business/447704/air-new-zealand-willing-and-able-to-increase-flights-from-australia
Ray, S. (2021). After Sydney, Melbourne Forced to Extend Lockdown as Australia Continues to Fight Delta Variant Outbreak. Forbes. https://www.forbes.com/sites/siladityaray/2021/07/19/after-sydney-melbourne-forced-to-extend-lockdown-as-australia-continues-to-fight-delta-variant-outbreak/?sh=621721e524fa
Ritchie, H. (2021). Australian government halves arrival cap, leaving thousands stranded as air fares skyrocket. CNN. https://edition.cnn.com/travel/article/australia-international-arrivals-cap-halved-cmd/index.html
Thorn, A. (2021). American Airlines First Carrier to Pull Out of Australia After Caps Cut. Australian Aviation. https://australianaviation.com.au/2021/07/american-airlines-first-carrier-to-pull-out-of-australia-after-caps-cut/
Thorn, A. (2021). More Qantas 787 Repatriations as Arrival Caps Halved. Australian Aviation. https://australianaviation.com.au/2021/07/more-qantas-787-repatriations-as-arrival-caps-halved/
Thorn, A. (2021). Strewth! Air New Zealand Now Australia’s Biggest International Airline. Australian Aviation. https://australianaviation.com.au/2021/07/strewth-air-new-zealand-now-australias-biggest-international-airline/
Visontay, E. (2021). Qantas and Jetstar stand down 2,500 staff for two months due to border closures. TheGuardian. https://www.theguardian.com/business/2021/aug/03/qantas-and-jetstar-stand-down-2500-staff-for-two-months-due-to-border-closures