Will the 'WA recession' affect VA and QF loadings to PER?

[Melburnian1]

One of the growth stories in Australian domestic aviation of recent times has been the MEL - PER route where numbers carried have significantly increased. Of course there are four airlines (two from each main group) plying thr route, so that helps, but the real difference has been VA's investment in some new Airbuses and its introduction of hot meals and free drinks.

There's been a debate in the financial pages with the Treasury Secretary oddly claiming 'you'll know a recession when you see on', yet WA's growth has gone into reverse for two quarters. There's still a lot of mining related investment but the downside is that future plans for further have decreased (and there have been partly union inspired massive cost increases on projects like the Chevron LNG one).

Do members think that there will be a reduction in FIFO workers heading across to PER each fortnight from MEL, SYD or even BNE and also a reduction in leisure travellers with the poor east coast eceonomy (consumer spending not rising as fast as even our moderate inflation) or am I getting ahead of myself? Will VA and QF have to pull a plane or two off these lengthy routes or are the yields and loadings still excellent on most flights?

 

[Melburnian1]

I should also have asked: how easy do members find it to redeem points for VA or QF flights on the MEL and SYD to PER routes? What about the busier times - impossible? (e.g. Mon or Tues morning to the West?)

 

[Reggie]

Whether WA is in or going into a recession, I will leave to other people to comment on, but what I can add from my personal observation and experience is there has certainly been increased redundancies. I don't follow the press, so not sure how widely reported it had been. Unlike other "the sky is falling in" periods of the past few years, this seems different, I know many white collar people have been made redundant or had their hours / days cut back. Geologists (whom are usually the first and hardest hit) are being made redundant and finding it hard to get another job. Mining Engineers and safety people are being laid off, but the former are filling the previously unfilled positions, albeit at lower salaries. I don't know a single job category that hasn't had people let go from the kitchen attendants, through to samplers, engineers, senior engineers, management, to head office staff like recruiters, HR, admin. This is across all minerals - gold, nickel, iron ore, diamonds. Benefits are being reduced, whereas the company was paying for flights from point of hire, they are now saying move to Perth, or pay for your own flights to Perth. So the short answer to the question, is yes I think QF and VA will be affected, so will the price gouging of hotels in Perth, Karratha and Port Hedland. Karratha currently $395 p/n for the Ibis and Karratha International

 

[Melburnian1]

Reggie, if you are correct it will be interesting to watch the BITRE dot gov dot au monthly passenger loading reports by route. These are only shown publicly where there is competition on a route (which is now most routes). I'd love to have a peek at forward bookings and see if the airlines are finding the numbers are starting to decline a bit.

 

[pauly7]

From my very scientific frequent flying analysis to PER the QF birds feel as packed as ever - but they do dominate these routes...

Haven't noticed any major schedule changes yet...?

 

[cove]

Have not seen the slow down just yet but it will come over the next 12 months. The pressure on everything in Perth has been massive. Last night there were several spare tables at a restaurant that is usually quite full on a Friday night.
It has been embarrassing to have hotels in Perth charging $500 to $1,000 a night for rooms that should have been no more than $200.

 

[Melburnian1]

Virgin Australia has six A330-200s of which four are leased; QANTAS has 20 of which four are leased.

If there is an economic downturn, would these airlines' likely strategy be to try to return the leased planes or (depending on the price obtainable) would they sell the ones that they owned, or at least one or two of them in QANTAS' case (despite the age of some of these planes) - or would both simply hold on to them in the hope that any downturn was 'cyclical' not 'structural' and perhaps park them at Avalon (in QANTAS' case) or Perth or Melbourne (in Virgin Australia's case?

Can anyone see sackings ahead for cabin crew and pilots in the next 12 months similar to what SQ has done with some pilots (though not cabin crew as far as I know)?

 

[Bundy Bear]

I am hoping the WA economy eases off a bit so I can afford a place to live.

 

[Reggie]

I am hoping the WA economy eases off a bit so I can afford a place to live.

Even with the downturn, I don't think you will see much reduction in rents or sale price. My parents house sold in 5 days for $40K more than expected. The place next to me had 19 people come through for a rental home open 3 weeks ago, and 5 of them put in offers.

 

[Sprucegoose]

I am hoping the WA economy eases off a bit so I can afford a place to live.

do you see FIFO workers as overly propping up the BNE property market?

 

[Reggie]

do you see FIFO workers as overly propping up the BNE property market?

Bundy has or is shortly moving to Perth.

 

[The Rok]

I am hoping the WA economy eases off a bit so I can afford a place to live.

Good luck with that. $420,000 for a coughpy 3 bed apartment in Currambine, $750,000+ for a cheapie house in Joondalup, and expect to pay close to or over $1M for a decent 3 bed appt in Subiaco.

A friend recently sold his bedsit/studio in Leederville for $540,000 and it was a cough hole complex.

 

[The Rok]

do you see FIFO workers as overly propping up the BNE property market?

About 30% of my colleagues FIFO from Perth and pay for their own flights back to MEL/SYD/BNE/ADL.

 

[Mal]

Good luck with that. $420,000 for a coughpy 3 bed apartment in Currambine, $750,000+ for a cheapie house in Joondalup, and expect to pay close to or over $1M for a decent 3 bed appt in Subiaco.

A friend recently sold his bedsit/studio in Leederville for $540,000 and it was a cough hole complex.

And that summarises many of the issues in Australia. When the bubble pops... Wow, it will pop.

 

[The Rok]

And that summarises many of the issues in Australia. When the bubble pops... Wow, it will pop.

I have resisted the urge to buy just yet, I'm waiting. I saw this happen and lived through it in IRL in 2007/2008. When the poo hits the fan I'll buy.

 

[Oneworldplus2]

I have resisted the urge to buy just yet, I'm waiting. I saw this happen and lived through it in IRL in 2007/2008. When the poo hits the fan I'll buy.

I think that there will also be a property downturn in Canberra after the election. I have a few friends who work in CBR and they are putting their 'buy' on hold until 2014.

 

[Hvr]

I think that there will also be a property downturn in Canberra after the election. I have a few friends who work in CBR and they are putting their 'buy' on hold until 2014.

I've heard the same thing from friends there, especially those who remember the devastation to the property market when Howard was elected. Not a political comment, just a statement of fact.

 

[Mal]

I've heard the same thing from friends there, especially those who remember the devastation to the property market when Howard was elected. Not a political comment, just a statement of fact.

Well if a shed load of public servants are laid off... Of course supply and demand metrics would lead to a reduction in rents and house prices overall.

 

[Reggie]

Talked with taxi driver on way to airport on Monday morning and he said they had noticed a drop off about 4 to 6 weeks ago. Still busy from 4am to 8am but then dead, whereas it used to be busy the whole day on Monday. Taxi home this arvo also confirmed the slow down.

 

[Melburnian1]

Perhaps someone with access to OAG flight routings and dates can inform us if an when VA, QF, JQ and TT make any substantive flight changes. Sometimes though it's hard to know if it is just seasonality (for instance, November is a notoriously low month for bookings on Australian transport as are February and strangely, May) or whether it's the result of a downturn or upsurge in demand. The Bureau of Infrastructure, Transport and Regional Economics route by route loading statistics may give us a better idea, but there's a time lag before these month by month statistics are published.