Airline Capacity Review 2020

Spotlight on November 6, 2020 Following the announcement that will reopen state borders with Victoria on November 23rd, both and Jetstar announced they will operate more than 250 flights a week! About This Report

The Demand Environment Disclaimer worldwide continue to operate under a drastically reduced demand This report is not a forecast. This report is a representation of scheduled environment, and this is impacting scheduled airline capacity at airports. capacity that has been uploaded by the airlines. It is therefore not reflective in While airlines in most domestic markets had been gradually increasing real time of media articles/announcements for the reasons cited above. It is also capacity back as the pandemic curve flattened, secondary spikes in daily not reflective of demand in the system and past load factors cannot be used to cases, in Australia, Canada and USA, caused recovery (Domestic and project demand until the market stabilizes. Airlines are adjusting schedules very International) to slow down or stall starting in August 2020 while recovery is frequently in the current environment and future schedules are not reliable. now in retreat in UK and Europe (Domestic). While tourism is being cautiously encouraged in some international jurisdictions, the disparate and ever- changing rules permitting entry, quarantining and testing are creating uncertainty in the market and dampening traveller confidence and therefore bookings.

Airline Data Reported This report is based on airline seat capacity uploaded into the schedules as of November 06, 2020 and extracted from Airbiz’ subscription service for Diio Market Intelligence. All figures in this report for a market are for seats in that market. The report may not reflect the most recently announced changes in the media because, depending on the airline, it could be a multi-week process from capacity announcement to when the airline schedule reflects the announced changes.

Comparison to China, and South Korea In this report, we compare Australia to a few key travel markets like New Zealand, China and South Korea. The reason for this is that these are markets that quickly put in place strong counter measures to the virus and have managed to bring their cases to a negligible enough level that domestic travel is either growing back (as is the case in new Zealand) or has already exceeded 2019 levels (as is the case in China and South Korea).

1 AIRLINE CAPACITY REVIEW – 2020 | SPOTLIGHT ON AUSTRALIA Recent Updates

Covid Update Reported Cases – Australia Compared to NZ and USA The adjacent graph is a 7-day moving average of daily cases per 100,000 population. As such this metric adjusts for the relatively small size of Australia and New Zealand’s populations compared to the much larger USA. Nevertheless it can be seen that Australia’s case load is much lower, on this per capita basis, than USA. The second peak in Australia, driven by cases in Victoria, has now come back in control as a result of strict lockdown measures. In contrast, the US is seeing another upward trend. These events internationally are not conducive to the build back of airline demand which seems to have stalled once again in many jurisdictions.

Aviation Update Despite the relatively low case load, , as elsewhere, has witnessed an unprecedented and drastic decline in traffic. Here is a round up of some of the recent aviation developments: Interstate Travel: Following the announcement that NSW will reopen state borders with Victoria on November 23rd, both Qantas and Jetstar announced they will operate more than 250 flights a week on five routes. Update: “Flights between Tasmania and New Zealand are set to restart in January for the first time since 1996….It comes shortly after the government also announced plans to allow the state to introduce hotel quarantine and start accepting Australians stranded abroad.” Cases (Deaths) by State and Territory Travel Bubble: “Tourism New Zealand is planning for a "pragmatic" two-way November 8, 2020 travel bubble to be in place with Australia in January, potentially dashing the hopes of some families looking to reunite by Christmas. New Zealand's Prime Minister has said the bubble will not be in place until Australia records 28 days without community transmission.”

2 AIRLINE CAPACITY REVIEW – 2020 | SPOTLIGHT ON AUSTRALIA AUSTRALIA: Domestic Market Overview – Scheduled Airline Seats

Australia Domestic • Following the uptick in July, domestic recovery trajectory had flattened with only a modest improvement in the September to October period; however November looks more promising with a significant upward movement. • It is now clear the Australian domestic recovery will not be as rapid as the one in China or South Korea but is on the right track. • Interstate border closures and the inconsistency between those borders, remains a severe constraint to domestic travel recovery; however significantly NSW and Victoria are reopening their border in late November. Expect to see a significant upwards trend in the next (December) version of this report.

2020 MAY JUN JUL AUG SEP OCT NOV AUSTRALIA A further Slight upward Continued upward Capacity build back Slight improvement Slight improvement A significant Domestic deterioration from movement to adjustments to stalls at to to -77%. Less than 1 improvement to April to May to -91% -87%. -81%. -81%. -79%. in 4 seats are -69% reflective of which is the bottom present in the the low number of of the market. market compared COVID cases once to 2019 levels. again.

3 AIRLINE CAPACITY REVIEW – 2020 | SPOTLIGHT ON AUSTRALIA AUSTRALIA: Domestic Market Detail – Scheduled Airline Seats

Australia Domestic – Intra And Inter State Dichotomy Due to strict internal borders being maintained between states and territories, the Australian market is seeing a dichotomy between the recovery of INTRAstate travel and INTERstate travel. The adjacent line graph shows a consistent recovery path of intrastate travel in blue, while the interstate line in orange is still far from its historic normal. Some of these restrictions are being relaxed as of November 2020. Intrastate vs Interstate The bar graph market share of intrastate versus interstate seat capacity indicates that Intrastate travel accounted for just under a quarter of seats a year ago (23%) and now accounts for nearly half of seats (48%). The good news is that the sustained growth back to almost normal levels in intrastate seats illustrates underlying demand for air travel (see top graph blue line) Constraint The Australian domestic aviation industry cannot achieve the same levels of domestic recovery as other nations illustrated on the previous slide, until the interstate border constraints and quarantine requirements are removed. Currently responsibility for changes to the interstate borders rests with the State and Territory Premiers, under advisement from their Chief Medical Officers. Some of these closures are now being reopened: https://www.australianfrequentflyer.com.au/australian-state-border-restrictions/ Supply Airlines were only able to be deploy capacity in a limited way while border closures and quarantine arrangements are in place. The changing nature of the border closures create challenges to airlines in publishing and delivering schedules. November and December should see a significant rise in Interstate capacity as state borders continue to reopen. Demand Consumers have responded well to airline sales as they have occurred and supported intrastate travel, indicating underlying drivers and substantial pent up demand to travel. This behaviour should be mirrored by Interstate travel in the coming months. Airlines report most ticket sales happen within a very short time frame of 2-3 days prior to travel, reflecting limited consumer 4 AIRLINE CAPACITY REVIEW – 2020 | SPOTLIGHT ON AUSTRALIA confidence. AUSTRALIA: International Market – Scheduled Airline Seats

AUSTRALIA INTERNATIONAL • Internationally, the situation is at stalemate, with borders closed to all but repatriating nationals in Australia and New Zealand, and capacity of returning travellers constrained by quarantine capacity. • Further the worsening situation in Europe and North America puts the recovery of the long haul further away, although vaccine news has given rise to cautious optimism. • Travel bubbles are being discussed again, both on the Tasman, with Pacific Island nations and selected nations in Asia. • Quarantine-free bubbles will be the next step change that will drive increases in international airline capacity.

2020 MAY JUN JUL AUG SEP OCT NOV AUSTRALIA A further Negligible upward International Recovery has Slight improvement Recovery is stalled No perceptible International deterioration in May movement to -93%. recovery is not stalled. Capacity at to -91%. Clearly an at -91% seats change with the to -94% which is the expected to happen -92%. extended period at compared to 2019. International market bottom of the quickly. Market the bottom of the still at -90%. market. remains at -93%. market may be expected.

5 AIRLINE CAPACITY REVIEW – 2020 | SPOTLIGHT ON AUSTRALIA AUSTRALIA: International Market – Scheduled Airline Seats Year-over-Year Scheduled Airline Seat Changes

November worse than October November similar to October (+/- 5%) November better than October

6 AIRLINE CAPACITY REVIEW – 2020 | SPOTLIGHT ON AUSTRALIA Contact Us

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7 AIRLINE CAPACITY REVIEW – 2020 | SPOTLIGHT ON AUSTRALIA