Domestic air passengers down two per cent Dec 2018

[Melburnian1]

The BITRe reported on Monday 18 February 2019 that domestic air passengers were down two per cent in December 2018 compared to the same month a year earlier.

There may be many reasons: economic conditions in some sectors (residential construction is one) being softer than many perceive, while there were flash floods in Melbourne and Sydney, possibly leading to some abandoning air travel if they couldn't then get a flight on the day they were booked.

15 of the busiest 20 domestic routes had a decline in travellers.

BNE - PER at minus 8.4 per cent and BNE - CNS were worst, declining 7.7 per cent. Partly weather related for the latter, and a reaction to fewer widebodies on the former?

ADL - BNE at minus 6.9 per cent was next (not a route where surface travel is feasible for most.

CBR - SYD (subject to heavy competition from self drivers, road coaches - Greyhound and Murrays - and NSW TrainLink - was also badly hit, dropping six per cent while OOL - SYD declined 5.3 pr cent.

MEL - SYD and BNE - SYD declined 1.4 and 1.1 per cent, while the number three route, BNE - MEL was off 2.1 per cent.

ADL - MEL dropped three per cent, ADL - SYD 4.3 per cent and ADL - BNE 6.9 per cent.

Outside the top 20 routes, PPP - SYD was worst, declining 24.6 per cent but this may reflect flooding, an airline pulling out or reducing flight frequencies. BNE - PPP was also down more than 17 per cent.

NSW intrastate routes such as SYD - DBO, PQQ, TMW,and WGA carried fewer but ABX rose.

One swallow does not...but even so, not a bright picture (although it shows how the airlines are concentrating on ending the capacity war).

 

[MEL_Traveller]

If you keep putting up fares then you'll price off demand. The real issue is not whether there's a drop in passenger numbers, but is there a drop in revenue or profit? Number could be well down but profits up. Win, win and another win for the airlines.

 

[jase05]

I know several families in ADL who find flights to BNE are usually more expensive than flights to OOL and so fly to OOL and rent a car or seek alternate transport from the Gold Coast up to Brisbane

 

[dajop]

If you keep putting up fares then you'll price off demand. The real issue is not whether there's a drop in passenger numbers, but is there a drop in revenue or profit? Number could be well down but profits up. Win, win and another win for the airlines.

Looking at the trunk routes, both SYD-MEL/BNE saw drops in the number of passengers < drop in available seats, therefore better load factors, which often means better profitability.

 

[pauly7]

It’s a yield game now with VA giving up the market share grab game and focussing more on trying to make some money...

 

[ethernet]

Banking Royal commission bites. New car sales down 14% year on year. APRA stupidity rewards cash buyers, hurts those with CC's. More airline fare damage will occur if dumb lending criteria remain. I chopped up one CC and missed a holiday. i think fares are softer now than same time last year. And I think car hire rates are up. If you are house hunting, flying is not good.

 

[Melburnian1]

Banking Royal commission bites. New car sales down 14% year on year. APRA stupidity rewards cash buyers, hurts those with CC's. More airline fare damage will occur if dumb lending criteria remain. I chopped up one CC and missed a holiday. i think fares are softer now than same time last year. And I think car hire rates are up. If you are house hunting, flying is not good.

And if you're selling a house in much of Sydney or Melbourne, not good either. I've seen one case in inner Melbourne, a few kilometres from the CBD, where a recent vendor suffered a 22 per cent or thereabouts loss on a property purchased in mid 2014, and that's without adding in his or her costs such as Victorian stamp duty upon purchase and paying the real estate agent upon sale (plus borrowing costs if applicable).

 

[froggerADL]

And if you're selling a house in much of Sydney or Melbourne, not good either. I've seen one case in inner Melbourne, a few kilometres from the CBD, where a recent vendor suffered a 22 per cent or thereabouts loss on a property purchased in mid 2014, and that's without adding in his or her costs such as Victorian stamp duty upon purchase and paying the real estate agent upon sale (plus borrowing costs if applicable).

Reduced housing prices are not always bad, assuming you have not fallen into negative equity. If I own a home valued at $1 mil and want to move to a nicer area I might have to pay $2 mil, so I have to invest another $1 mil. If the "market" falls by 20% my current house is priced at "only" $800,000, and my new house is priced at $1.6 mil. I now have to invest another $800,000, so I'm better off by $200,000. Of course, I'm talking about buying a house to live in, not buying into a Ponzi scheme.

 

[Melburnian1]

Reduced housing prices are not always bad, assuming you have not fallen into negative equity. If I own a home valued at $1 mil and want to move to a nicer area I might have to pay $2 mil, so I have to invest another $1 mil. If the "market" falls by 20% my current house is priced at "only" $800,000, and my new house is priced at $1.6 mil...

Fair point, but most of us are unable to pick the exact trough of any market - be it shares, property, art or something else - and property price moves may not be uniform across every suburb (or street). The real estate market in the big cities has had a heady run for a number of years (way beyond CPI increases) but reduced housing prices feed into lowering consumer confidence, and then retail spending and eventually employment are adversely affected. But I agree that we shouldn't consider real estate a Ponzi scheme, and nor ought we be too greedy.

 

[ethernet]

Please start a new thread - Housing price drops else this will wander off topic. Presently 8% of Ponzi refinancers who bet the bank are failing refinance when it pops up. Flying is often discretionary, and a status symbol and a function of easy credit/equity expansion The question is are the airlines drops just the beginning, because they did well recently - and when did we see this going back in time. If only I had bought QF at $1. We will see how BA goes post brexit.

 

[Melburnian1]

... The question is are the airlines drops just the beginning, because they did well recently - and when did we see this going back in time....

To get back on topic, yes, a legitimate question but as I said in the initial post, one swallow does not a summer make.

We need to see the first three months' figures for calendar 2019 as these will cover a key discretionary spending period (January), the back to work and associated travel (February) and. given Easter is in April, a further working period in March (although one has to adjust for the Easter effect or absence for March).

 

[jase05]

I’d love to see the statistics for International travel and whether there is any correlation between the two. With some of the ultra low airfares abroad especially to Asia perhaps families that are not flushed with funds find it better value to fly to Asia for cheaper than what they can to Australian cities and then get more bang for your buck at their destination

 

[Melburnian1]

I’d love to see the statistics for International travel and whether there is any correlation between the two. With some of the ultra low airfares abroad especially to Asia perhaps families that are not flushed with funds find it better value to fly to Asia for cheaper than what they can to Australian cities and then get more bang for your buck at their destination

But you can easily see these stats!

The story is one of continual rises in international passenger traffic for almost eight consecutive years, although as mainland Chinese arrivals slow the rate of increase is starting to taper off somewhat.

BITRE website has monthly international as well as domestic passenger numbers. Both are very detailed; here is the international one:

https://bitre.gov.au/publications/ongoing/files/International_airline_activity_1811.pdf

These are key points stated by BITRE. It vindicates what you say, jase05, although international flights of course carry foreigners not just Australian citizens off on a holiday:

'International scheduled passenger traffic in November 2018 was 3.324 million compared to 3.192 million in November 2017 – an increase of 4.1 per cent. The most recent annual month on month decrease in traffic was recorded in March 2011 (-1.6 per cent).

The chart on the next page compares monthly passenger traffic for the year ended November 2018 with monthly passenger traffic for the year ended November 2017. Passenger traffic for the year ended November 2018 was 41.451 million which is a 5.1 per cent increase over the figure for the year ended November 2017.'

 

[jb747]

I'm no economist by any means, but I've looked at the housing market for years, and figured it would all crash back to earth eventually. It can't rise at well over the inflation rate forever.

Look at Apple. Price rises on their phones over the past few models have been quiet astounding. So the fans bought for a while, and Apple kept raising the prices...and then, all at once, the buyers simply went away. A few car companies I can think of have done the same thing. Your fans stay for a while, but when they go, you are royally screwed.

 

[dajop]

Its really hard to draw any conclusions from one year to the next. Did the airlines reduce capacity because of reduced demand, or to try and drive up prices?

Also the business year effectively ended on Friday 21 Dec 2018 vs Friday 22 Dec 2017. Could one day less business traffic have an effect as well?

 

[Melburnian1]

...Also the business year effectively ended on Friday 21 Dec 2018 vs Friday 22 Dec 2017. Could one day less business traffic have an effect as well?

Normally, yes, one day makes a difference but this was so close to Christmas (and school holidays had mostly if not all commenced) so wouldn't flights be full either way, and airlines unable to schedule specials because aircraft were already being timetabled to the max?

 

[dajop]

Normally, yes, one day makes a difference but this was so close to Christmas (and school holidays had mostly if not all commenced) so wouldn't flights be full either way, and airlines unable to schedule specials because aircraft were already being timetabled to the max?

A couple of points:
- Xmas/school holidays are full, but do have reduced capacity on trunk routes. Also in 2018, that traffic was probably spread over 3 days vs 2 in 2017 (22,23,24) vs (23,24).
- One extra business day (Fri 1 Dec) in 2017 vs 2018 (assuming Mon 24 Dec is not really a business day)
- Reduced scheduling is evident in this years schedules, eg MEL-SYD on Mon 23 Dec, QF has 26 flights vs a "normal" business Monday, 3 weeks earlier on 2 Dec which as 37 flights scheduled.

With drops in the order of magnitude of 2% (and less on trunk routes) you can't discount this "Christmas timing" effect.

 

[froggerADL]

If only I had bought QF at $1. We will see how BA goes post brexit.

I bought QF at $1.08 when Qantas Loyalty was worth more than that by itself. I sold at $4, I wasn't greedy!

 

[JohnK]

Constant increase in airfares tend to have an effect on numbers travelling.

Forward sales are not great either so then all gimmicks come out of the closet. The recent sale with $99 airfares BNE-SYD did not include most of December. A few years back I was able to book Christmas Eve returning back a few days later for $99 each way. Now that seems to be blocked.