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Are there indications of a slowdown in the Australian aviation market?

The answer depends on what part of the market you’re looking at. There are a lot of discussions taking place, both in Australia and globally, about a slowdown in aviation growth. As one example, Airport Council International’s Monthly World Airport Traffic Report for March 2019 points to subdued growth in passenger markets and a decline in freight volumes. Keeping an Australian focus, the team compiled data released from the Bureau of Infrastructure, Transport, and Regional Economics (BITRE) for the YE March 2019 to understand what effects are being felt at the country’s major airports.

12 month rolling year on year growth rates were calculated for the major capital city airports for a five-year period from YE March 2014 to YE March 2019. Using the year on year growth rates instead of absolute passenger volumes allows for a normalisation of the scale of each airport. Shown on the graphs below, these were calculated for Domestic, International, and Total Traffic for:

  • Sydney (SYD);

  • Melbourne (MEL);

  • Brisbane (BNE);

  • Adelaide (ADL);

  • Perth (PER);

  • Hobart (HBA);

  • Darwin (DRW);

  • Canberra (CBR); and

  • All Airports (ALL).

Source: BITRE

Assessing the domestic data, there certainly appears to be a consistent downward movement in the growth rates across the airports covered. This slowing growth trend commenced in YE Feb 2019. It should be noted though that although growth is slowing, the rates are still mostly positive with the exception of Darwin.

Source: BITRE

The international market presents a markedly different picture with still strong growth rates being experienced across the portfolio of airports. Whilst there has been a slight softening trend since the beginning of 2019, it is not as pronounced as that seen in the domestic market. Darwin has been able slow its decline in passenger growth although the rate is still negative. Both Darwin and Canberra grow rates need to be considered against the relatively small international traffic base however.

Source: BITRE

Due to the dominance of domestic operations as a component of overall traffic, there is a notable softening in growth rates across Australia. In fact, more recent data released directly from the airports supports this. Sydney Airport, in their traffic performance report for May 2019, shows a -0.5% YoY decline for domestic traffic. International remained in positive territory at 3.4% whilst total traffic was a muted 1% YoY. Similar data is presented in other monthly reports across the airports in the portfolio.

For the time being, aviation demand is still in positive territory overall however there are indications that this growth may reach negative levels on the back of a weakening domestic environment. Long-term there shouldn’t be much cause for concern. Aviation, which is cyclical in nature, has historically shown resilience to economic slowdowns. In the short-term, aviation stakeholders should brace themselves for headwinds. Certainly, in the air service development arena, a prudent strategy would be to protect the capacity currently available at an airport rather than attempting to pursue big gains at this stage. By opening discussions across airline and aviation stakeholders and working on mutually beneficial outcomes, airports can ensure their facility continues to be commercially attractive during these times. Holding on to capacity is easier than trying to regain it once it has been cut.

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