Record passengers fly between Sydney & MelbourneDomestic aviation
Flights filling up: Over the year to January, the proportion of occupied seats on domestic flights hit a 7- year high of 79.4 per cent.
Record passengers on Sydney-Melbourne flights: The load factor on the Sydney-Melbourne route is at record highs of 87.5 per cent in January, up from 86.8 per cent in December. A record 9.13 million passengers flew on the Sydney-Melbourne route in rolling annual terms in January. Aviation activity data is important for airlines and hotels.
What does it all mean?
Aussie domestic travelling is booming. According to Tourism Research Australia (Austrade), the number of domestic overnight travel trips increased by 7 per cent to 97.2 million in 2017. And those travelling interstate increased their spending by 6 per cent to A$64.5 billion, while the number of nights away from home within Australia rose by 5 per cent to 351 million.
The majority of domestic trips made by Aussies over the year ended December was for holidays (11,425 trips, up by 4 per cent) and visiting families and friends (10,251 trips, by by 6 per cent). In a sign that business conditions are at record highs and that economic growth is solid, business travel surged by 14 per cent to 10,251 overnight trips over the year to December 2017.
More overnight trips means more revenue for airlines, rental cars, hotels, accommodation and theme parks.
In this environment it’s no surprise that major domestic airlines Qantas and Virgin Australia posted stellar earnings results in the latest reporting season.
Qantas reported a record A$976 million profits for the December 2017 half year. Strong earnings growth on its domestic flights saw its underlying profit increase by 20.5 per cent, underpinned by ongoing capacity management and strong unit revenue growth. Competitor Virgin Australia posted its best profit in 10 years with underlying profit before tax of A$102.5 million.
This strength is reflected in today’s aviation data from the Bureau of Infrastructure, Transport and Regional Economics (BITRE). Flight loads are strong and revenue is increasing, particularly on the Sydney-Melbourne route, which is one of the busiest worldwide. And popular domestic holiday destinations such as Broome, Ballina, Proserpine, Sunshine Coast and Hobart feature strongly in increased passenger numbers.
What do the figures show?Domestic airline traffic
According to the Bureau of Infrastructure, Transport and Regional Economics (BITRE) in January 5.08 million passengers were carried on RPT (regular public transport) domestic flights, an increase of 2.1 per cent on January 2017. (In smoothed terms, passenger numbers were up 1.6 per cent in the year to January).
Revenue passenger kilometres (RPKs) performed were 6.06 billion for the month, up 1.4 per cent compared with January 2017. (Smoothed: up 0.8 per cent).
Capacity, measured by available seat kilometres (ASKs), increased by 0.9 per cent compared with January 2017 to a total of 7.63 billion. With RPT passenger traffic increasing at a faster rate than capacity, the industry wide load factor (RPKs/ASKs) increased from 79.1 per cent in January 2017 to 79.5 per cent in January 2018 – the lowest level in six months.
The annual average load factor hit a near 7-year high of 79.4 per cent in January.
The load factor on the key Sydney-Melbourne route averaged 84.8 per cent in the year to January, the highest ever recorded.
The BITRE reported: “The greatest percentage increase in RPT passenger numbers, compared to January 2017, was on the Broome – Perth route (up 30.9 per cent). There were large increases on a number of other routes, including Ballina – Sydney (up 24.6 per cent), Brisbane – Proserpine (up 23.3 per cent), Brisbane – Hobart (up 23.0 per cent) and Melbourne – Sunshine Coast (up 19.0 per cent).”
And: “Routes with traffic decreases in January 2018 compared with January 2017 included Brisbane – Hamilton Island (down 33.0 per cent), Hamilton Island – Sydney (down 23.3 per cent), Alice Springs – Darwin (down 14.4 per cent) and Brisbane – Gladstone (down 9.6 per cent).”
What is the importance of the economic data?
The Bureau of Infrastructure, Transport and Regional Economics (BITRE) releases data on domestic aviation each month. The data is useful in tracking consumer spending and airline performance.
What are the implications for interest rates and investors?
The Aussie tourism boom continues. Anaemic wages growth isn’t acting as a hand brake on our desire to go on holiday or conduct business. In fact, improving job security may be encouraging us to take more overnight trips.
Business conditions and confidence is strong. More business trips are being conducted, as evidenced by the record number of passengers travelling between our two largest business centres – Sydney and Melbourne.
More travel means more revenue and larger profits for airlines. Qantas and Virgin Australia are reaping the rewards of a firm Aussie economy.
CommSec expects interest rates to remain stable until at least late 2018.
Published by Ryan Felsman, Senior Economist, CommSec