Australia’s Aviation Industry receives a $715 Million Worth of
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In 2018, the Aviation industry of Australia was able to sustain its excellence in business and tourism, leaving an approximate annual income of $45.98 billion and added $18.42 billion to Australia's financial system. Its goal was to raise tourism’s annual revenue to an additional $115 billion in the next ten years. But airlines across all countries have struggled over financial and travel-related issues since the occurrence of COVID-19. According to Australia’s domestic aviation statistics as of December 2019, there were 5.48 million passengers carried on Australian domestic commercial aviation. While there were 4.039 million passengers for international aviation. A significant decrease in both domestic and international aviation percentages was seen after coronavirus strikes the world.
Due to this coronavirus outbreak, many airlines need major assistance and support from the federal government to sustain the aviation industry in the country. On March 17, Regional Express Airlines (REX), one of the largest regional carriers in Australia, wrote an open letter to Deputy Prime Minister McCormack about how Rex and all other carriers badly need government support. “Rex does not believe that Rex, and all other regional carriers, will be able to pull through this crisis without significant assistance if the health authorities’ projections prove accurate,” Neville Howell, Rex chief operating officer stated in the letter. He even added that Rex was the only Australian carrier that has remained active even during global adversities for the past two decades; this includes war, fuel prices above $US120 a barrel, volcanic eruption, GFC, disastrous bushfires and crippling pilot shortages.
Rex had been asking the Australian government to refund domestic aviation fees and to offer supreme assurance for new lines of credit to keep all regional carriers operational. It also stated that permanent damage would arise across the aviation industry if the government would lack involvement since small regional airlines had only a few weeks of reserves left to continue operating. Cash reserves are shrinking fast given that fleets are grounded and flights are much fewer than half full. Sydney-based CAPA Centre for Aviation also informed the public that a large number of carriers across the globe will be bankrupt by the end of May unless the government takes action.
“Forward bookings are far outweighed by cancellations and each time there is a new government recommendation it is to discourage flying. Demand is drying up in ways that are completely unprecedented. Normality is not yet on the horizon,” it said. The demand for travel decreases as an effect of the coronavirus outbreak, leaving all airlines with no option but to appeal for government assistance.
“As the impact of the coronavirus and multiple government travel reactions sweep through our world, many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants,” it added.
Mike Higgins, who is the head executive of RAAA, or Regional Aviation Association of Australia, informed ABC that he 100 percent gives his support to Rex. He even added that Rex mirrors the worries of most RAAA’s associates and that if Australia’s economy decreases, it will also affect his industry which depends on aircraft, components, and maintenance from the United States.
Michael McCormack, the second-most senior official in the Government of Australia, who is also the Infrastructure, Transport, and Regional Development Minister, agreed that the aviation industry was experiencing financial challenges due to today’s pandemic crisis. People are reducing their travels, resulting in most airlines declaring cancelation of some widely held flights.
“Our airlines run on tight budgets at the best of times and these past few weeks have been particularly tough. I’ve been speaking with Australian airline executives every day and will continue to work with them to make sure they receive the support they need,” Deputy Prime Minister McCormack said.
The Federal Government responded through the relief package that was given to the aviation industry. It provides A$715 million worth of support package to its aviation industry after all airlines got struck hard by the coronavirus epidemic. The support package includes the reimbursement of some government fees such as fuel excise, air service fees on domestic airline operations, and even the regional aviation security charges. Australian Government also promised to waive the fees that were already paid by domestic carriers starting February 1, giving back almost $160 million to the industry.
“Providing this assistance not only helps our airlines but also the entire aviation industry, regional Australians in particular and other industries such as tourism and trade, which depend on aviation,” Mr. McCormack added.
This goes after deep capacity cuts by Qantas and Virgin, which are the two biggest carriers in Australia. Both airlines reduced half of their domestic capacity and grounded a large number of aircraft as they stumble from the effects of this pandemic crisis. Countries such as China and Singapore have also mitigated the adverse effect of this outbreak on their particular aviation industries.
Qantas and Jetstar both proclaimed that 90 percent of international flights and 60 percent of domestic flights would be reduced starting at the end of March until the last day of May. Virgin also cut its flight as a result of the lessened number of demand for domestic and international travel. According to Qantas chief executive Alan Joyce, the effort to contain the spread of coronavirus has led to a huge drop in travel demand, the likes of which we have never seen before. Qantas would also suspend 20,000 of its 30,000 personnel during the shutdown.
Catherine King, who is the Labor’s Infrastructure spokesperson stated that the relief package was a welcome first step, but it is highly likely that much more will be needed. She even added that “Further capacity reductions of both international and domestic services from both major airlines in the last 24 hours and ongoing requests from across the aviation sector indicate further support will be needed.”
But it is not yet the end of the Australian government’s intervention in the aviation industry of the country. As Mr. McCormack promised, they will continue to help the industry seeing that it experiences challenges related to today’s global crisis.