Australian Aviation & Coronavirus - The Impacts and Future Outlook

Written By: Jack Buscombe

It's well documented that the recent coronavirus hit the travel and tourism industries harder than most during the early stages of 2020. International and cross-border travel was banned, leaving mass amounts of stranded tourists and Aussies alike. ASX listed companies were dropping like flies, and some called upon the government for bail-outs to keep their business afloat. The silent enemy was as close to a zero-day attack on the aviation industry as our generation has ever seen.

As we move through the global pandemic, we continuously learn and adapt accordingly. Australia has been lucky in many ways, however several aviation businesses and employees are still facing grim futures. This article takes a look at some of the major players and developments involved in the travel industry dissolution of 2020.

The Emergence of Covid-19

It almost seems as if it were an overnight occurrence between the coronavirus being a self-contained overseas issue, to drastically affecting the entire Australian economy.

The doomsday toilet paper rush morphed into travelers having to reschedule early flights back home. The tourism industry coasted along for a few weeks, and then borders began to close. Activities were banned and businesses were cashing in their chips.

There were mass job-losses and bearish economic outlooks. And then it was all quiet on the western front. People were staying indoors and new case statistics began to drop.

Google trends tells an interesting story as to the timeline of events. From the early slow burn during February to the borders closing and the rapid influx of active cases across Australia during March.

How the Travel Industry Responded

The final week of January 2020 was Australia's first taste of what was to come. Moments like the Trade Workers' Union calling on the federal government to ban all flights from China were pivotal. Alerts like this were echoed across the globe. Within 3 weeks, countries were closing their borders entirely and all flights were cancelled.

Airline fleets were grounded, customer service staff were sent home and everyone was knocking on the door for refunds. In an unprecedented state of emergency, travel bans were upgraded to level 4 (do not travel overseas) for every country in the world.

And with these bold moves, several prisoners were taken.

Not proud to be a virgin

Virgin Aircraft with Sir Richard Branson

On the 21st of April, Virgin Australia announced it had entered voluntary administration after 20 years of service down under. With over 12,000 creditors and $7 billion in debt, big players began bidding on a takeover.

The airline temporarily stood down 80% of its 10,000 strong employee base and reduced domestic flight capacity by over 90%.

The fall of Virgin Australia was one of the most notable events to occur from the covid-era in our country. And it certainly had some stiff competition.

Qantas on Thin Ice

Flying Qantas Aircraft

Our prideful kangaroo airline has had its fair share of public scrutiny over the decades. With a long history of government bailouts, the media was watching closely as to how they would respond to the crisis.

Luckily for Qantas, a direct public bailout has not been necessary (so far). With the profits Qantas has enjoyed over the last few years, and the industry-wide $715 million airline relief package, Qantas made big moves to keep their head above water.

In March, Qantas CEO Alan Joyce addressed a candid open letter to the Qantas workforce listing the effects of Covid-19 on the business. The letter detailed how the company's $4.3 billion annual wages expense wouldn't be sustainable. With the ensuing slide in capacity, some lofty changes were necessary.

Alan Joyce - Qantas CEO
Qantas CEO 'Alan Joyce' in Canberra. Photo Credit: Mark Graham

In the note, Joyce revealed that 2/3rds of the Qantas workforce would be stood-down - around 20,000 staff. Annual bonuses were scrapped and the Qantas board/group management would forgo their salary for at least 3 months.

The CEO later solidified the Next100 plan moving forward. The plan meant that:

  • 6,000 jobs were to be permanently cut and another 15,000 would extended their temporary pause.
  • Around 100 of the Qantas/Jetstar aircraft fleet would be grounded for over a year. The remaining Boeing 747's were retired from the fleet (after 29 years in service) and Airbus A380's were placed in storage.
  • A $1.9 billion capital raise would take place.

So while all eyes have been on the Qantas group, the aviation community has generally been understanding and favourable to the transparency. With public updates from CEO 'Joyce', they outlined their plans and presented information with conviction in the face of uncertainty.

An Airline Monopoly

A common fear the public has expressed over the demise of Virgin Australia is the potential for a monopoly in the local airline industry. The Qantas-Virgin battle has come to an end and the Qantas Group (Qantas and Jetstar) is left standing with the freedom to behave in monopolistic ways.

A potential monopoly means the Qantas group could effectively control industry prices and thus capacity for the majority of Australian air travel. As a reminder of the 2002 collapse of Ansett, the public is expecting for a new player to enter the market when people are back in the air.

Ansett Aviation Aircraft
Former Australian Airline Ansett collapsed in 2002

The effects on the Australian Travel Industry

For the moment, international travel is banned and likely won't revamp for a long while. Holiday plans are changing and domestic travel has taken substitute of overseas holidays. Restrictions have been highly dynamic to say the least, and the second incursion of cases in Victoria means restrictions are back-flipping only days after they are lifted.

International Travel

Australia's first move came on the 1st of February 2020 when all incoming flights from China were suspended. The call was made just 1 week after Australia confirmed its first novel case of the coronavirus.

Over the following weeks, coronavirus cases rose and its presence flooded the media. Then during February, the spread of the coronavirus slowly took hold and active cases grew from 10 to 30 by March.

Within the first two weeks of March, active cases were doubling every 3 days and governments began to declare a state of emergency. Active cases had reached 875 nationally on the 20th of March when Australia closed its borders to all non-citizens and non-residents.

Thousands of scheduled flights were suspended overnight from the decision, and this became the catalyst for the circumstances which ensued thereafter.

Domestic Travel

During the statewide and inter-suburb rules of traveling within a specified range from home, domestic air travel was placed on hold almost entirely. Private charters weren't an option, and Australian airlines were forced to postpone all flights. In extremely limited circumstances, people were able to travel with the appropriate permissions.

Aussies were encouraged to work from home and non-essential businesses were ordered to close from March 25. A number of Australian states and territories began enforcing border control and recreational activities were off the cards.

The 'non-essential' economy was in lock-down and businesses were required to cancel appointments, or take them online. Commercial airports were barren and domestic flights dropped by 93.6%.

Virgin Aircraft Landing in Brisbane
Virgin Aircraft landing in Brisbane Airport

As the airline industry was caving, flight charter companies inversely faced booming demand for private trips. Given the self-quarantine rules and travel restrictions, operators and passengers were under the thumb for compliance. Due to the instability and hoops that charter companies were required to jump through, servicing the high demand became fickle and many operators eventually closed temporarily.

Local Flight Experiences

Flight experience operators were directly in the firing line for the non-essential travel bans. This meant there were several-month bans on:

  • helicopter tours
  • airplane joyflights
  • aerobatic flights
  • skydiving, and
  • hot air balloon flights

Under the pressure, some businesses shut their doors indefinitely when the restrictions were put in place. Due to the costs of owning and operating aircraft, the uncertainty regarding time-span was an important part in making the tough decisions.

Rainforest Flight

Flight tour operators were gutting their premises, selling their aircraft and salvaging as much as possible.

As state borders re-open and domestic travel begins to take place, flight tour appointments have seen a return during July. However, with the fear of the Victoria's second wave of cases spreading across the country, the rest of the green-light Australian states have not seen the return that the tourism bodies were hoping for.

Has Government Stimulus Helped?

As entire industries were placed on hold, travel and tour business began to bleed as everyone scrounged for cash flow. Refunds over-weighed even the most adverse of financial projections.

Despite the unforeseen halt in demand, not all business expenses stopped accordingly. In many cases, costs rose and sizeable overheads would be a challenge to compensate for.

ATO to the rescue?

ATO Sign

The primary saviour of the Jobkeeper payment was but a drop in the ocean for many flight operators. It was one thing to be able to pay staff, however the biggest issue of fixed and ongoing company costs were not the target of this stimulus.

There was also the ATO administered Cash Flow Boost, which was arguably more valuable to the smaller flight operators. This meant the tax office would somewhat sponsor ordinary revenue to a partial degree to keep the lights on and the aircraft housed.

The issue of late delivery was minor as it came through by form of credit in the quarterly reporting ending in 31st of March. Some businesses had been restricted from trading for several weeks before they saw the cash flow supplements required to keep them from defaulting on payments.

Between the various branches of aviation and tourism, it's fair to say most of these businesses were negatively affected by the pandemic net of fiscal relief. Naturally, these overarching stimulus programs helped some businesses more than others.

The industry specific relief offered to the airlines and general aviation however, was more focused on handling the impacts of the social restrictions.

Airlines get the spotlight

Aircraft takeoff

For the airlines, refunds had to be issued while entire fleets were being grounded. Pilots' 'currency' were expiring which was traditionally a matter funded at the expense of employers. So the only way to stay afloat was to lay off staff or pause their employment.

As new coronavirus cases were skyrocketing in March, the federal government announced a fiscal rescue package of $715 million to keep our airlines running. It came as one of the first industry-specific relief measures announced by the government as warnings emerged most airlines around the world would be bankrupt within 2 months.

Have Charter Companies Been Forgotten?

Charter Companies are Closing Down

There was some relief for a number of stakeholders in the General Aviation space. CASA (the Civil Aviation & Safety Authority) published a resource of industry advice for members of all shapes and sizes in GA. Included in it was a list of relief measures. In addition to the nationwide regular Job Keeper and Cashflow Boost payments, CASA and the government provided the following:

During a period where private travel typically ramps up, restrictions meant that charter flight operators were forced to sit idle. The main issue with having unused aircraft are the ongoing housing and compliance costs that don't sit idle.

The General Aviation space received significantly less stimulus than the airlines, however the fiscal relief went some way with assisting these time-related issues. Whether these measures were enough is debatable and their effects are mostly yet to be seen. With the number of GA businesses closing operations, you'd be forgiven for thinking that they're doing it tougher than the airlines.

How have pilots been impacted?

Pilot cleaning plane

Generally speaking, 2020 has not been a great year to be a pilot. The vast majority of employed pilots work for airlines in passenger-moving aircraft. Unfortunately, with a reduction of domestic travel capacity by over 90%, and the closure of international borders - almost every airline pilot was temporarily stood down, and some lay-offs were permanent.

Fortunately, many of the laid-off airline pilots were placed into casual positions for companies which were booming. For example, Woolworths offered night-fill positions for laid-off pilots and airline workers.

It's not all bad news for pilots however. For many pilots who work outside of the airlines and smaller charter companies, jobs are safe and sometimes even booming. For example, several companies in the agriculture space have been hiring additional pilots. Demand for farming work increased, and thus the need for R22/R44 pilots and the like were in demand.

So while most pilots have had it tough, the pilot job market hasn't all been red. But for pilots in training or those who have been recently licensed, it's going to be a lot tougher than normal to find employment.

Can laid-off pilots remain current through the crisis?

The main problem for inactive pilots is remaining current. As a pilot with a private or commercial licence, you are obligated to fulfill set requirements set out by the safety authority to be permitted to fly. Generally, the rules include:

While pilots have spent several months out of the air, their currency can expire and this impacts their ability to apply for jobs, or do the job that's eventually waiting for them. Normally, a pilots employer will provide the necessary assistance to keep them current, however with the mass cull of jobs this won't necessarily apply.

Assistance for pilots

Pilots Flying in Cockpit

CASA has introduced measures to assist pilots with their currency. The assistance has been in the form of exemptions for provisions relating to:

  • medical certificates, and
  • proficiency checks

The measures put in place seem to barely scratch the surface for the potential issues COVID-19 would cause. However, it's an extremely complex problem when you have remarkable external effects thrown into the economies of the job market.

The government and CASA have had to play a balancing game between keeping financial stability and pilots happy, all while maintaining aviation safety as a priority.

Effects of Covid-19 on AirShare

Inside the cockpit of a rideshared helicopter flight

Almost all of AirShare's experiences have been temporarily restricted at some point during 2020. We have taken all possible measures to keep up to date with the regulations and have acted accordingly.

As the curve flattened and restrictions began to soften, most experiences were reinstated in a modified capacity. The usual ride-sharing flights (which we loved most!) weren't an option. Private flights were possible within the rules that passengers lived in the same household.

As every state (except Victoria & NSW) is now at a daily average of 0 new cases, the majority of AirShare experiences have returned back to normal. The remainder which are in limbo have been removed until further notice.

What to expect moving forward

Amid the saturation of speculation and media hype, it's important to keep an open mind. There are few certainties, and expert forecasts delivered from authoritative figures should only be used as guides.

Beyond the 'trans-tasman bubble' (flights between Australia and New Zealand), it's unlikely Aussies will experience the privilege of overseas travel for the remainder of 2020.

In April, Australian Prime Minister Scott Morrison, suggested there are no plans to open international borders for the foreseeable future.

In June, Qantas CEO Alan Joyce suggested the airline's international flights would likely not resume until July 2021.

As we learn more and progress towards the end of the pandemic, restrictions and clearances are being issued on a weekly basis. Most notably with the second resurgence of new cases, the domestic aviation sector is on high alert and changes are happening from day-to-day.

Cheap Flights

Cheap flights on the horizon
Cheap flights on the horizon. Photo Credit: Philipp Alexandrov

With the collapse of Virgin Australia and the speculation of a Qantas monopoly, fears are high that airline flights will skyrocket. Contrarily, Qantas CEO Alan Joyce has publicly announced that we can expect a number of things when they're back in the air:

  1. It will be competitive
  2. Domestic travel will start well before international travel.
  3. There will be lots of low fares

He suggests that given Australia's huge domestic potential, the momentary instance of 'a single airline' will not stick - at least not for a long time.

The idea that domestic travel starting well before international travel is no surprise. With Australia 'flattening the curve' well in advance of many other countries, domestic travel has been increasing. A sage piece of advice we all must bare in mind however is to not take the brakes off too early.

The good news everyone has been hoping to see is cheap flights. As revenues get back to normal and jobs are gradually reinstated, airlines are expected to push for a quick and unvanquished comeback. This means travelers will likely see some great deals as life returns to normal.

A Second Wave

The second outbreak which has recently hit Victoria in record numbers shows the importance of keeping up to date with guidelines set by the relevant authorities. Tourism and cash spending is important to muster a healthy economy, however resurgences like these have nullified so much of the progress which had been made.

The latest wave has already been the final straw for several tourist businesses. As tourism ramps back up outside of Victoria and NSW, operators across the country are holding tight.

Travel companies and tour operators are banking on business to 'pop' as we inevitably clear from the quarantine period. The inter-state contrast is stark, with every other state seemingly out the woods. 'Recovered' states and cities have started going hard to push tourism through efforts like the recent 'Good to Go' campaign in Queensland.

Conclusion

So far, the aviation industry has seen unprecedented moves which has gutted long-standing airlines of all capacity. Several thousands of workers have been stood-down and pilots are being forced to make major career changes. Charter companies and experience providers are falling into the red, and a staggering number of companies have closed their doors.

It's a fiercely grim moment in history which has been pivotal for the travel and tourism space. With the demise of Virgin Australia, we can soon expect to see new players enter the market - hopefully bringing the gift of cheap travel deals.

If there's any advice that can be offered, it's to help out tour companies where possible. Stay informed and when you're good to go, get out there and do something fun!

Resources

FAQ

Is there government assistance for pilots?

Yes, CASA has provided pilots with a number of exemptions to help maintain their currency. Exemptions for medical and proficiency checks means that they have been able to stay current without having to spend large amounts of money during the downturn.

Can you fly privately during the coronavirus?

It is possible to charter both domestic and international flights. So long as you abide by restrictions of the departing and entering destinations, you will be able to fly privately.

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