Data supports Rod Sims’ comments about aviation

The Australian Travel Industry Association (ATIA) says data shows former ACCC Commissioner Rod Sims is right in his comments that reform in aviation is critical to ensure the market operates fairly and consumer outcomes improve.

ATIA commissioned a comprehensive study, conducted by former Qantas economist Tony Webber, which provides a detailed analysis over two decades, demonstrating a trend where airlines often cancel flights for purely commercial reasons, impacting both the travel industry and consumers.

Key findings from the research

1. Flight cancellations for commercial gain: Airlines have been found to cancel flights not just for operational or weather-related reasons but also to drive profits.

2. Impact on travel intermediaries: The primary cost for travel intermediaries is the time spent by staff in reorganising trips, which includes rebooking flights, accommodations, and other services. This results in lost opportunities and revenue.

3. Effect on tourism expenditure: A 5% decrease in travellers due to flight cancellations could lead to an estimated A$405 million loss in domestic tourism from Australia’s top ten airports annually. Sydney Airport’s cancellations alone could reduce domestic tourism expenditure by between A$143 million and A$572 million per year.

4. Airports’ revenue losses: The top ten Australian airports face an estimated annual loss of A$4.8 million in aeronautical revenue and A$1.5 million in non-aeronautical revenue per year, assuming a 5% passenger drop due to cancellations.

5. Passenger inconveniences and costs: Passengers bear out-of-pocket costs and lose valuable time due to cancellations. The opportunity cost for delayed passengers can be significant, particularly for business travellers. Cancellations also lead to seats being withdrawn from the market, which raises airfares for those yet to book a flight.

Airlines are able to maintain the practice of cancellations without losing valuable airport access due to the 80-20 rule. Under the rule, airlines can keep a specific timeslot as long as they don’t cancel more than 20% of flights in that slot over the year.  

In light of these findings, ATIA calls for immediate action and reforms in the aviation sector to address these issues, ensuring the sustainability and growth of Australia’s travel and tourism industry.

The report is available here.