AU INDUSTRY (ANZSIC) REPORT I4902
Domestic Airlines in Australia
Mayday: COVID-19 restrictions have severely reduced industry demand and revenue
Tom Youl | November 2021
IBISWorld.com +61-3-9655-3800 info@IBISWorld.com
Contents
About This Industry...........................................5
Industry Definition..........................................................5
Major Players................................................................. 5
Main Activities................................................................5
Supply Chain...................................................................6
Similar Industries........................................................... 6
Related International Industries....................................6
Industry at a Glance.......................................... 7
Executive Summary....................................................... 9
Industry Performance..................................... 10
Key External Drivers.....................................................10
Current Performance...................................................12
Industry Outlook............................................. 15
Outlook......................................................................... 15
Performance Outlook Data......................................... 17
Industry Life Cycle....................................................... 17
Products and Markets..................................... 19
Supply Chain................................................................ 19
Products and Services.................................................19
Demand Determinants................................................ 21
Major Markets..............................................................22
International Trade.......................................................24
Business Locations..................................................... 24
Competitive Landscape...................................27
Market Share Concentration....................................... 27
Key Success Factors................................................... 27
Cost Structure Benchmarks........................................ 28
Basis of Competition................................................... 32
Barriers to Entry........................................................... 33
Industry Globalization..................................................34
Major Companies............................................36
Major Players............................................................... 36
Other Players................................................................39
Operating Conditions...................................... 41
Capital Intensity........................................................... 41
Technology And Systems........................................... 42
Revenue Volatility........................................................ 45
Regulation & Policy......................................................46
Industry Assistance..................................................... 47
Key Statistics..................................................49
Industry Data................................................................49
Annual Change.............................................................49
Key Ratios.................................................................... 49
Additional Resources...................................... 50
Additional Resources.................................................. 50
Industry Jargon............................................................50
Glossary Terms............................................................50
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About IBISWorld
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Covid-19
Coronavirus
Impact Update
IBISWorld's analysts constantly monitor the industry impacts of current events in
real-time – here is an update of how this industry is likely to be impacted as a result
of the global COVID-19 pandemic:
• The Domestic Airlines industry has been severely restricted by the COVID-19
pandemic and related restrictions on travel. Industry revenue is forecast to more
than halve over the two years through 2020-21.
• On 21 April, Virgin Australia, Australia's second largest airline entered voluntary
administration, due to its poor financial situation. Virgin Australia's new owner, Bain
Capital, has suggested the airline will fly at a reduced capacity over the short term,
including the retirement of the Tigerair brand. Reduced capacity is also expected to
contribute to the industry's decline over the two years through 2020-21.
• Industry profitability is expected to decline as a result of the COVID-19 pandemic,
with the industry being loss making in 2020-21.
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About This Industry
Industry Definition Domestic airlines primarily operate aircraft on scheduled routes within Australia totransport both passengers and freight.
Major Players Qantas Airways Limited
Virgin Australia Holdings Pty Limited
Main Activities The primary activities of this industry:
Scheduled domestic passenger air transportation
Scheduled domestic freight air transportation
Air transport terminal operation (except airports)
The major products and services in this industry:
Full-fare and business passenger transport
Low-fare passenger transport
Freight transport
Other services
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Supply Chain


SIMILAR INDUSTRIES
Aircraft Manufacturing and
Repair Services in Australia
International Airlines in
Australia
Non-Scheduled Air Transport
in Australia
Airport Operations in
Australia
Rail, Air and Sea Freight
Forwarding in Australia

RELATED INTERNATIONAL INDUSTRIES
Global Airlines Domestic Airlines in the US Airlines in China Scheduled Passenger Air
Transport in the UK
Scheduled Air
Transportation in Canada
Airlines in New Zealand Passenger Air Transport in
Ireland
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Industry at a Glance
Key Statistics
$9.5bn
Revenue
Annual Growth Annual Growth Annual Growth
2017-2022 2022-2027 2017-2027
-6.9% 9.4%
$-227.9m
Profit
Annual Growth Annual Growth
2017-2022 2017-2027
-41.9%
-2.4%
Profit Margin
Annual Growth Annual Growth
2017-2022 2017-2027
-11.2pp
96
Businesses
Annual Growth Annual Growth Annual Growth
2017-2022 2022-2027 2017-2027
-1.6% 0.6%
25,299
Employment
Annual Growth Annual Growth Annual Growth
2017-2022 2022-2027 2017-2027
-1.5% 2.1%
$2.3bn
Wages
Annual Growth Annual Growth Annual Growth
2017-2022 2022-2027 2017-2027
-5.5% 6.4%
Key External Drivers % = 2017-2022 Annual Growth
4.0%
World price of crude oil
-5.0%
Aircraft kilometres flown
-31.6%
International travel to Australia
0.6%
Domestic tourist visitor nights
3.8%
Real household discretionary income
0.7%
Consumer sentiment index
Industry Structure
POSITIVE IMPACT
Barriers to Entry
High
Globalization
Low
MIXED IMPACT
Life Cycle
Mature
Industry Assistance
Medium
NEGATIVE IMPACT
Revenue Volatility
Very high
Capital Intensity
High
Concentration
High
Regulation
Heavy
Technology Change
High
Competition
High
Key Trends
Strong tourism growth supported industry expansion over
the two years through 2018-19
Virgin Australia's downsizing is expected to limit the
industry's recovery in 2021-22
Industry profitability has fallen over the past five years due to
weak demand since March 2020
Airlines will likely increase capacity in line with rising demand
over the next five years
Bonza Aviation could represent the first major industry entry
since Tigerair in 2007
Qantas and Virgin Australia are likely to heavily invest in fleet
upgrades over the next decade
Despite revenue growth, the industry is forecast to remain
loss making in the current year
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Products & Services Segmentation
Full-fare and business
passenger transport
65.7%
Low-fare passenger
transport
19.9%
Freight transport
8.3%
Other services
6.1%
Domestic Airlines
Source: IBISWorld
Major Players % = share of industry revenue SWOT
STRENGTHS
High & Steady Barriers to Entry
Medium & Increasing Level of Assistance
Low Imports
High Revenue per Employee
WEAKNESSES
High Competition
Very high Volatility
Low Profit vs. Sector Average
High Customer Class Concentration
High Product/Service Concentration
High Capital Requirements
OPPORTUNITIES
High Revenue Growth (2022-2027)
High Performance Drivers
World price of crude oil
THREATS
Very Low Revenue Growth (2005-2022)
Low Revenue Growth (2017-2022)
Real household discretionary income
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Executive
Summary
Operators in the Domestic Airlines industry have faced volatile
trading conditions over the past five years.
The COVID-19 pandemic has significantly restricted air travel volumes. Most state
governments closed their borders in late 2019-20, all but halting interstate travel.
Industry revenue strongly declined during the same year, despite moderate growth
prior to March 2020. Industry revenue further declined in 2020-21 as COVD-19
restrictions continued to limit air travel. However, monthly passenger numbers rose
steadily during the same year, offering some relief to airlines. Industry demand is
expected to rebound in 2021-22. This anticipated growth is despite strict lockdowns
in New South Wales and Victoria during the first quarter of the year. Strong vaccine
coverage is likely to allow unincumbered air travel over the second half of the
current year, with revenue forecast to rise by 54.3%. However, Virgin Australia's
downsizing, including the retirement of the Tigerair brand, is expected to limit airline
capacity and industry revenue during the current year. Overall, industry revenue is
expected to fall at an annualised 6.9% over the five years through 2021-22, to $9.5
billion.
Airfares trended up over the two years through 2018-19. Over the same period,
Qantas and Virgin Australia optimised routes and streamlined processes in an
attempt to improve profitability. Domestic tourist visitor nights grew steadily, in
terms of both tourists and corporate travellers. Rising airfares and the reduction of
several operating costs resulted in profit margins increasing over the two years
through 2018-19. However, industry airlines are expected to incur significant losses
over the three years through 2021-22 as fixed costs spike as a share of revenue
amid weak travel volumes.
Industry revenue is forecast to increase at an annualised 9.4% over the five years
through 2026-27, to $14.9 billion. Passenger numbers are projected to rise
following the likely end of state border closures in 2021-22. Domestic tourism and
international travel to Australia are projected to rise over the next five years, driving
the industry's expansion. Nevertheless, the industry is anticipated to take several
years to fully recover in revenue and profitability terms.
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Industry Performance


Key External
Drivers
Domestic tourist visitor nights
Domestic tourist visitor nights measures overnight stays at locations more than 40
kilometres from home. Demand for domestic air travel tends to increase when the
number of domestic tourist visitor nights rises, as the large distances between
major cities and tourist attractions in Australia encourages air travel. Domestic
tourist visitor nights are expected to rise in 2021-22, providing an opportunity to
airlines.
Real household discretionary income
Trends in real household discretionary income influence demand for domestic air
transport. When income growth is strong, households tend to increase spending on
discretionary items, such as holidays. This trend usually increases demand for
industry services. Real household discretionary income is expected to grow in
2021-22.
Aircraft kilometres flown
The number of aircraft kilometres flown is used to measure domestic aviation
activity in Australia. An increase in aircraft kilometres flown indicates an increase in
the number of passengers and quantity of freight transported by domestic airlines.
As the industry derives revenue from scheduled passenger flights, an increase in
aircraft kilometres flown tends to boost industry revenue. The number of aircraft
kilometres flown is expected to increase in 2021-22.
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International travel to Australia
International travel to Australia represents the number of short-term foreign arrivals
in Australia. International arrivals are an important source of demand for industry
services, as international travellers often take domestic flights to visit different
parts of Australia. Most industry players have aligned themselves with international
airlines to provide seamless transfers between international and domestic flights.
International travel to Australia is expected to increase in 2021-22.
World price of crude oil
Fuel is a significant cost for domestic airlines. Rising crude oil prices increase
industry purchase costs, which airlines partly offset through fuel hedging contracts
or by passing on cost increases to passengers through higher prices. However,
most industry operators are unable to pass on full increases in fuel costs due to
price competition. As a result, increases in crude oil prices present a threat to the
industry. The world price of crude oil is expected to fall slightly in 2021-22.
Consumer sentiment index
The consumer sentiment index measures households' opinions regarding their
financial situation and the economy. Negative consumer sentiment typically means
that consumers are concerned about their current and future financial situation.
This factor tends to reduce demand for industry services, as pessimistic
consumers are more likely to defer or cancel domestic trips. Consumer sentiment
is expected to fall but remain positive in 2021-22.

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Current
Performance
Trading conditions have been mixed for the Domestic Airlines
industry over the past five years.
Prior to the outbreak of COVID-19, the industry's major operators, Qantas and Virgin
Australia, benefited from a mostly upward trend in domestic passenger traffic.
However, industry revenue is expected to fall at an annualised 6.9% over the five
years through 2021-22, to $9.5 billion. This decline is primarily attributable to the
COVID-19 pandemic, which has resulted in significant restrictions on travel.
COVID-19
Domestic air travel has been restricted at varying degrees since
March 2020.
Restrictions on personal movement, including state border closures, were
implemented by state governments to limit the spread of COVID-19. Travel
restrictions resulted in industry revenue sharply declining in 2019-20, despite solid
growth over the first half of the year. In April 2020, domestic revenue passenger
kilometres (RPKs) totalled just 2.6% of the same month in 2019, according to
BITRE. April 2020 marked the lowest monthly total of domestic aviation passenger
numbers during the COVID-19 pandemic, at 145,895. Australia's success in limiting
COVID-19 case numbers relative to many other nations resulted in travel restrictions
relaxing over the second half of 2020-21, providing a brief respite period to industry
airlines. Domestic air passengers totalled 3.5 million in April 2021. However,
industry revenue declined significantly over the year, as monthly RPKs remained
well below benchmarks set prior to the COVID-19 pandemic. This decrease was
partly due to negligible international travel to Australia. A sharp fall in airfares also
restricted industry revenue in 2020-21, despite government subsidies on domestic
flights offering partial support to airlines.
Virgin Australia entered into voluntary administration in April 2020. The significant
restrictions placed on the aviation sector following the outbreak of COVID-19
resulted in the airline entering administration to boost capital and reduce debt.
Although Virgin Australia had been reporting solid underlying earnings, near-
constant revamping and restructuring had caused the company to report statutory
losses for nearly a decade straight. Virgin Australia was purchased by Bain Capital
and subsequently delisted from the ASX on 17 November 2020.
Virgin Australia's downsizing is expected to negatively affect the industry's
performance in 2021-22. The company retired its discount brand, Tigerair, as part of
a restructure. In addition, the active fleet under the Virgin Australia brand has been
reduced by 11 aircraft compared to before the COVID-19 pandemic, as at October
2021. Industry flight capacity is expected to be lower in the current year compared
with 2018-19. However, Qantas has stated it intends to operate at above pre-
COVID-19 capacity over 2021-22, notwithstanding strict lockdowns in Victoria and
New South Wales over the first quarter of the year. Strong underlying demand for
travel is anticipated to result in industry revenue rebounding during the current year.
Increasing vaccine coverage means future lockdowns are unlikely, offering industry
airlines their first extended opportunity at revenue growth since March 2020.
Overall, industry revenue is forecast to increase by 54.3% in 2021-22.
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Conditions prior to COVID-19
Competition between Virgin and Qantas has strongly affected the
industry over the past decade.
At the beginning of the decade, domestic airfares fluctuated due to price wars
between the two major airlines, as both companies sought market share on key
domestic routes. However, the two airlines limited direct price competition over the
two years through 2018-19. As a result, airfares moderately rose over the same
period. Full-economy airfares increased the most, despite a decline in household
discretionary income, which restricted demand among leisure travellers. Both
Qantas and Virgin benefited from increased demand from the small-to-medium
business market, amid positive business confidence over the two years through
2018-19. According to the BITRE, in June 2019, the full-economy airfare index
reached its highest point since October 2007, and substantially increased by 21.0
basis points from two years prior.
Domestic discount airfares have remained low for most of the past five-year period.
Competition between Jetstar and Tigerair, which were respectively Qantas and
Virgin's low-cost carriers, remained strong until the retirement of the Tigerair brand
in March 2020. Over the two years through 2018-19, both airlines optimised flight
capacity by cutting inefficient flights. Similarly to the trend reported in full-economy
airfares, price growth has been a function of reduced supply as much as increased
demand.
Profitability and fuel
Industry profitability is expected to decline over the five years
through 2021-22, with the industry making a loss in the current
year.
The strong decline in industry revenue during the COVID-19 pandemic is the driver
of this downward profit trend. Airline operational costs are highly fixed over the
short term, meaning revenue falls typically impinge on profitability. In response to
the sharp revenue declines over the two years through 2020-21, operators have
engaged in cost-cutting initiatives to bolster profitability. These measures have
included reducing staff numbers and temporarily freezing wages. High entry and
exit barriers in the aviation sector mean that the number of domestic airlines
operating in Australia tends to remain stable. However, enterprise numbers have
fallen over the past five years due to temporary exits during the COVID-19
pandemic. Industry employment has also decreased over the period amid falling
demand. Staff temporarily suspended due to low flight activity are included in the
industry's employment statistics.
However, industry profitability was trending mostly upward before the outbreak of
COVID-19. Qantas' industry-specific profit surged from 0.5% of revenue in 2013-14
to 13.0% in 2018-19. Despite Virgin Australia's financial struggles, the company had
been reporting solid profit margins from domestic operations, including a peak of
7.2% of revenue in 2017-18.
Fluctuations in fuel prices can significantly influence industry profit margins, as fuel
is one of the industry's largest costs. The price of aviation fuel increased over the
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two years through 2018-19. This trend was furthered by a decline in the value of the
Australian dollar, as fuel is imported. However, the price of fuel crashed in 2019-20.
This decline was due to a plunge in demand for oil, such as from global
manufacturing industries and the travel sector. However, fuel prices have steadily
and strongly increased since March 2020, to sit just below pre-COVID-19
benchmarks in August 2021 (most recent data).
Historical Performance Data
Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic
Demand
($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m)
2013–14 13,059 3,918 311 101 29,947 N/A N/A 2,899 N/A
2014–15 13,700 4,809 315 100 27,268 N/A N/A 2,898 N/A
2015–16 13,948 5,203 319 103 26,777 N/A N/A 2,985 N/A
2016–17 13,549 5,311 317 104 27,243 N/A N/A 3,069 N/A
2017–18 14,244 5,826 332 107 27,926 N/A N/A 3,137 N/A
2018–19 14,356 5,714 336 108 27,400 N/A N/A 3,076 N/A
2019–20 10,756 3,819 326 103 26,341 N/A N/A 2,562 N/A
2020–21 6,153 2,517 251 92 23,918 N/A N/A 1,935 N/A
2021–22 9,496 3,444 302 96 25,299 N/A N/A 2,309 N/A
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Industry Outlook
Outlook The Domestic Airlines industry is projected to expand over the next
five years, in conjunction with the likely containment of the
COVID-19 pandemic.
The easing of travel-related
restrictions is forecast to boost both
domestic tourist visitor nights and
the number of international tourists
visiting Australia. Industry airlines
are anticipated to report strong
growth in passenger numbers over
the period. Domestic tourism is
projected to rise particularly strongly
over the short term, as factors such
as limited international flight
availability and hotel quarantine
requirements discourage overseas
travel. Industry revenue is projected
to grow at an annualised 9.4% over
the five years through 2026-27, to
$14.9 billion.
Industry recovery
Industry revenue is forecast to again grow strongly in 2022-23,
following the partial recover of domestic aviation in 2021-22.
High vaccine coverage in Australia should result in lockdowns no longer being used
to limit COVID-19 case numbers. State border closers are expected to ease over
2021-22. Consequently, airlines should be largely unimpeded in allocating flight
capacity over the next five years. However, the industry's full recovery is likely to
take several years. Although demand is projected to rebound strongly over the
period, airlines are forecast to carefully expand capacity. Over the short term,
positive cashflow is likely to be the core objective of industry airlines. Below-
average airfares are anticipated be a feature of airlines' immediate strategies, in an
attempt to entice Australians back to air travel. However, demand growth is
projected to outpace that of supply over the next five years, placing upward
pressure on airfares. Although Virgin Australia is forecast to strongly grow over the
period, the airline will take several years to return to a size comparable to 2018-19.
This capacity gap is likely to prolong the industry's recovery in revenue terms.
A changing landscape
Virgin's downsizing following its voluntary administration and
privatisation have altered the industry's landscape and outlook.
Virgin Australia's purchaser, Bain Capital, has suggested the airline will operate on a
smaller network than it did before the COVID-19 pandemic. The company will likely
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operate on the most profitable routes while demand conditions trend to those
reported pre-pandemic. Consumers will also have fewer airfare options, with Virgin
Australia's Tigerair brand being discontinued. Bain Capital has indicated Virgin will
operate as a mid-market brand, with airfares potentially being priced between
Jetstar and Qantas. Reduced industry competition is projected to place upward
pressure on airfares over the next five years.
The expansion of Regional Express Airways (REX) is forecast to slightly increase
competition for Qantas and Virgin Australia over the next five years. REX has leased
six Boeing 737-800 NGs, marking the entry of jet-engine aircraft into the company's
fleet. Previously, REX operated prop-planes only. REX is likely to initially target the
highly profitable Melbourne-Sydney-Brisbane triangle, which accounts for almost
30% of domestic airline passengers. If this strategy is successful, REX may further
expand in the domestic aviation sector. However, the company is likely to remain a
minor player compared with Qantas and a stripped-back Virgin Australia over the
period.
Jetstar, the lone budget carrier in the domestic market as at October 2021, may
face competition from potential incumbent, Bonza Aviation. The airline is likely to
operate as an independent budget carrier. However, Bonza is yet to receive
regulatory approval to enter the Australian market. If granted approval, the airline
has stated it intends to fly routes not frequently serviced by major airlines, focusing
on regional locations. Unlike REX, Bonza is unlikely to focus on the Melbourne-
Sydney-Brisbane triangle. Bonza's entry to the industry could reinvigorate industry
price competition, offsetting prevailing trends.
Industry enterprise numbers are projected to increase slightly over the next five
years as tourism growth encourages industry participation in rural areas. Industry
establishment numbers are also forecast to increase over the period. Airlines are
anticipated to open more flight routes to regional areas over the next five years in
response to increasing demand from international tourists.
Profitability
Industry employment is forecast to increase over the period.
All three major domestic airlines are likely to increase their workforce as capacity
grows with demand over the next five years. Although further automation by airlines
will likely constrain this rise in employment, any increase in capacity necessitates
more in-flight staff. Industry profitability is projected to increase significantly over
the next five years amid recovering demand and a strong focus on profitability
among major players.
The overall moderation of direct industry competition between Qantas and Virgin
Australia is projected to increase airfares and profitability over the next five years. In
particular, the cessation of the Tigerair brand is likely to give Jetstar far more
pricing freedom compared with the past decade, unless Bonza Aviation enters the
industry. Postponed aircraft purchases are anticipated to support short term
industry profitability. Virgin Australia has cut its forward order of aircraft in half, and
is scheduled to accept 25 737 MAX 10s from 2023-24. Qantas plans to undergo a
significant fleet revitalisation, with over 100 new aircraft likely to be purchased over
the decade through 2033-34.
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Performance Outlook Data
Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic
Demand
($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m)
2022–23 12,117 4,495 314 98 26,460 N/A N/A 2,728 N/A
2023–24 13,279 4,896 320 100 27,883 N/A N/A 2,897 N/A
2024–25 13,884 5,214 327 99 28,337 N/A N/A 2,987 N/A
2025–26 14,354 5,500 334 100 28,170 N/A N/A 3,074 N/A
2026–27 14,864 5,809 339 99 28,050 N/A N/A 3,153 N/A
Industry Life Cycle The life cycle stage of this industry is Mature
LIFE CYCLE REASONS
The industry has been growing at a slower rate than the wider economy, which is partly a
consequence of COVID-19
The industry’s services have wholehearted market acceptance
Technological change is focused on improving customer satisfaction and enhancing
operational efficiency


The Domestic Airlines industry is in the mature phase of its life cycle. Industry value
added (IVA), a measure of the industry's contribution to the overall economy, is
forecast to grow at an annualised 0.9% over the 10 years through 2026-27. This
represents an underperformance of the overall economy, with real GDP expected to
rise at an annualised 2.2% over the same period. While this IVA result is primarily
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attributable to the COVID-19 pandemic, the industry has reached a mature life cycle
phase.
An increasing number of international tourists are a market for domestic airlines.
However, the industry has been displaying several signs of reaching a mature
phase, such as the slow increase in capacity prior to the COVID-19 pandemic.
Industry operators have shifted their primary focus from market share growth to
profit margins. In addition, the domestic market is mature. Business numbers and
population growth are modest. Although the rise of budget carriers had boosted the
market for domestic air travel, this growth has largely been attained. Furthermore,
industry products have remained mostly stable over the long-term. Airlines offer
some combination of economy, premium economy and business class seating.
Customers have further options on price points, but these tend to reflect booking
flexibility rather than service differentiation.
Despite the mostly mature nature of the industry, airlines continue to undergo
significant technological change. Major players have been introducing new aircraft
to reduce fuel costs, and improving ground-based and in-flight customer service
facilities to attract passengers. In addition, firms are upgrading existing aircraft and
fitting them with new technologies to improve efficiency and customer experiences.
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Products and Markets
Supply Chain KEY BUYING INDUSTRIES
1st Tier
Tourism in Australia
Rail, Air and Sea Freight Forwarding in
Australia
2nd Tier
Mining
Finance in Australia
KEY SELLING INDUSTRIES
1st Tier
Aircraft Manufacturing and Repair
Services in Australia
Airport Operations in Australia
2nd Tier
Aircraft Manufacturing and Repair
Services in Australia
Catering Services in Australia
Non-Scheduled Air Transport in Australia
Petroleum Product Wholesaling in
Australia
Products and
Services


Firms in the Domestic Airlines industry transport passengers and
freight on scheduled routes in Australia, either between main cities
or to regional destinations.
Most industry revenue is generated from passenger transport, with a small portion
derived from freight transport. Industry airlines also earn a modest portion of
revenue through ancillary fees and services. The COVID-19 pandemic has resulted
in decreased revenue in nominal terms across all service segments other than
freight transport.
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Full-fare and business passenger transport
Business travellers generally prefer full-fare services due to the
flexible nature of the tickets, which enables them to change flights
with minimal costs and allows access to business lounges.
In contrast, leisure travellers and families have increasingly favoured low-cost
airlines, as leisure travellers usually plan their trips in advance and can defer their
travel until they are happy with the price.
Prior to the COVID-19 pandemic, this segment was mostly declining as a share of
industry revenue. Weak discretionary income growth pushed leisure travellers
towards low-fare transport. Capacity reduction among full-fare carriers also
constrained segment revenue. However, the Tigerair brand ceased operating in
Australia in March 2020, leaving Jetstar as the only low-fare carrier in the industry.
This reduced the size of the lost-fare passenger transport segment. Nevertheless,
the decline in passenger volumes during the COVID-19 pandemic, coupled with the
strong growth of the freight transport segment, has resulted in this segment falling
as a share of industry revenue over the past five years.
Low-fare passenger transport
The rise of low-fare transport has given more consumers the
opportunity to use air transport for business and leisure.
Low-cost carriers sustain their low ticket prices by offering traditional inclusions,
such as baggage and in-flight entertainment, for an additional fee, rather than as
part of the ticket price. These carriers also operate fewer types of aircraft, which
reduces maintenance costs.
Carriers that mainly sell low-fare tickets have increasingly attracted leisure
travellers, who are generally more price-sensitive than business travellers. Many
household consumers and some business travellers have transitioned to low-fare
brands such as Jetstar, seeking cost savings. Therefore, this segment was
increasing as share of industry revenue prior to the COVID-19 pandemic. However,
during its administration period, Virgin announced that the Tigerair brand would be
retired. Tigerair therefore ceased operating in March 2020. The removal of Tigerair's
revenue from this segment resulted in low-fare passenger transport services falling
as a share of industry revenue in 2020-21. Overall, this segment has decreased as a
share of industry revenue over the five years through 2021-22.
Freight transport
Freight transport has significantly increased as a share of industry
revenue over the past five years.
This result is due to the constraints on passenger travel during the COVID-19
pandemic, coupled with the strong rise of consumer goods retailing over the same
period. Domestic airfreight has increasingly been used by businesses to ship
goods, due to supply chain disruptions following the outbreak of COVID-19. Low
load factors over the two years through 2020-21 freed up cargo hold space for
freight purposes. In 2020-21, domestic airfreight tonnage fell by only 5.0%,
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compared with a 46.8% decline in passenger numbers, according to the Bureau of
Infrastructure and Transport Research Economics. Surging airfreight prices have
also supported segment revenue from March 2020 onward. However, domestic
airfreight is applicable only to certain time-sensitive items, as the relatively high
cost of air transport makes road and rail freight much more attractive to
downstream companies. Therefore, the effect of rising online retail sales has only
moderately affected domestic airlines. In comparison, the freight transport
segment in the International Airlines industry has reported far more robust growth
during the COVID-19 pandemic.
Other services
Domestic airlines generate revenue from several other sources,
such as charges on excess baggage, cancellation fees and booking
change fees.
In-flight catering and bar services not included in the ticket price are also included
in this segment. Industry revenue derived from these sales has increased as a
share of revenue over the past five years. Consumers have shifted toward
discounted tickets that do not include booking flexibility as standard. These types
of fares have increasingly been offered by full-fare carriers. For instance, Virgin
offers a Getaway fare on which customers incur fees to change their booking.
Consequently, this segment has increased as a share of industry revenue over the
past five years. Frequent-flyer programs also provide some revenue to industry
participants and are often targeted at high-value business travellers. Although these
activities are excluded from the industry, loyalty programs are a core strategy used
by major players Qantas and Virgin to attract customers and reward repeat custom.
Demand
Determinants
Demand for domestic air transport services can fluctuate depending
on changes in airfares, consumer sentiment and business
confidence.
In addition, shifts in the value of the Australian dollar and the price of substitute
international air transport can significantly influence demand. Demand for air
transport also correlates with demand for the movement of time-sensitive freight.
Leisure travellers
Movements in airfares greatly determine demand for leisure-related
air travel.
When airfares are high, consumers can either postpone or exclude air travel from
their holidays. Conversely, discounted airfares increase the demand for the
industry's services. However, the need for cross-country time-sensitive transport
provides a steady avenue of demand. This includes transport to reach sporting
events, private occasions, concerts, conventions or other such events occurring in a
different city.
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Demand for domestic travel is also partly influenced by the value of the Australian
dollar. For example, as the dollar depreciates, international travellers are more likely
to visit Australia and stay longer as their currency is worth more. In turn, these
travellers are likely to use domestic flights to visit different parts of the country,
increasing demand for the industry's services. The depreciation of the Australian
dollar can also cause Australian residents to holiday domestically, as travelling
overseas become relatively more expensive, further boosting industry demand.
Safety issues and severe weather events, like cyclones in Queensland, can
temporarily discourage consumers from flying, restricting demand.
Business travellers
Business travellers are less price-sensitive than domestic
travellers, as they are less able to defer domestic travel if airfares
rise.
Demand determinants for business travel include international trade activity,
corporate profitability and the availability of substitutes for air travel such as video
conferencing. During periods of weak corporate profitability, firms may downgrade
travel class for cheaper airfares or restrict business travel, reducing demand for
domestic flights.
Freight
Demand for airfreight services is influenced by the level of high-
value time-sensitive imports and exports, and airfreight rates.
Operating costs, capacity and innovation in shipping and packaging technology can
influence airfreight rates. It is more efficient to transport time-sensitive and high
value-to-weight products via air. Electronics and high-value products are usually
transported by air. This is because these products need to reach their markets
quickly due to rapid technological change, which makes the products obsolete. As
such, time to market is important, as it can influence demand for these products.
Major Markets
Domestic airlines provide services for individuals, businesses and logistics
companies. Most industry revenue is earned from airline ticket sales for scheduled
air passenger transport. Industry operators also derive revenue from transporting
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time-sensitive freight through air haulage. Passengers for domestic airlines can be
either Australian leisure or business travellers, or international travellers flying
across the country.
Domestic leisure travellers
Domestic leisure travellers are expected to account for just over half of industry
revenue in the current year. This market comprises domestic travellers that make
occasional trips to take a holiday, or visit family or friends. Price is an important
factor for this market and is normally the first issue considered when planning a
trip. Other factors taken into account include baggage allowance, time and route of
travel, and service. Leisure travellers are the primary market for low-cost carriers.
This market is projected to increase as a share of industry revenue over the five
years through 2021-22, due to strong growth in the current year. Business-related
travel is expected recover slower than the leisure travellers segment. For instance,
visiting friends and family is expected to be a powerful motivator to travel once
restrictions are eased. Instances of discounted airfares during the current year is
expected to boost demand from this market. However, travel for holiday purposes
grew at a slower rate than business-related travel over the two years through
2018-19, due to weak discretionary income growth.
Domestic business travellers
This segment includes travel where airlines charge a premium for tickets, such as
business class and full-fare economy, which allows travellers greater flexibility with
flying dates and times. Business travellers sometimes make bookings at short
notice, which consequently attracts a higher price. The value of sales per passenger
is therefore significantly higher for business customers than for leisure travellers.
Qantas dominates the business traveller market due to the breadth of its network,
large number of flights and its network of airport lounges. Virgin has increasingly
focused on capturing a greater share of the domestic business traveller market
from Qantas over the past decade by transforming from a low-cost carrier to a full-
service airline.
Service quality and flight flexibility are key benefits sought by corporate travellers.
As a result, these consumers typically purchase full-economy or business class
tickets, which boosts the share of industry revenue attributable to this market
relative to the number of travellers flying for business purposes. Total flights for
business purposes were increasing strongly prior to the COVID-19 pandemic.
Furthermore, full-economy ticket prices increased markedly prior to the outbreak of
COVID-19, and are the most common ticket type purchased by businesses.
However, the domestic business travellers market is projected to decrease as a
share of industry revenue over the five years through 2021-22. Travel for business
purposes is expected to be limited relative to leisure travel during the current year.
International travellers
The international travellers market has declined as a share of industry revenue over
the past five years. Inbound tourism has fallen significantly during the COVID-19
pandemic, including a 98.1% decrease in 2020-21. The international travellers
market remains a modest share of overall industry revenue. International tourists
accounted for 7.8% of domestic air travellers in calendar year 2019.
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Prior to the outbreak of COVID-19, the Australian dollar's depreciation made travel
to and within Australia cheaper for overseas visitors. International travellers use
domestic airlines to travel within Australia, and total international tourist visitor
nights rose sharply over the two years through 2018-19. However, expenditure on
domestic flights has grown at a slower rate. Most international tourists to Australia
visit only one or two locations, with the proportion of travellers going to multiple
locations decreasing over the two years through 2018-19.
Logistics companies
Logistics companies often contract airlines to transport freight domestically. While
direct competition in the domestic airfreight segment is low, airlines face
competitive pressures from alternative forms of freight, such as rail and road. This
competition has constrained domestic airfreight tonnage over the past five years.
Furthermore, airline capacity utilisation has restricted the amount of cargo space
available, in terms of both volume per commercial flight and number of flights.
However, the sharp revenue decline in other markets has resulted in logistics
companies growing as a share of industry revenue over the past five years.
Dedicated air freighters have remained in operation during the COVID-19 pandemic
while commercial flights have run on severely reduced capacity.
International
Trade
Exports in this industry are Low and Steady
Imports in this industry are Low and Steady
International trade in the industry is negligible and this has remained unchanged
over the past five years. This is because the industry is composed of airlines
operating flights within Australia. However, the industry engages in international
service trade via the nationality of carriers operating in Australia. Service exports
relate to Australian carriers carrying non-resident passengers across the country,
whereas service imports relate to foreign carriers carrying Australian residents
within Australia.
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Business
Locations

Business Concentration in Australia
ACT
NSW
NT
QLD
SA
TAS
VIC
WA
0 10 20 30
Percentage of Enterprises (%)
Domestic Airlines in Australia
Source: IBISWorld

Most airlines have their headquarters located in capital cities, particularly Sydney,
Melbourne and Brisbane. These cities have the busiest airports due to the high
population density on Australia's eastern seaboard compared with the rest of the
country. Despite New South Wales being home to the busiest airport, Sydney
Airport, the state is more significant as a hub for international transport, with
domestic airlines preferring to locate their hubs in Victoria and Queensland. These
states have more available terminal space and lower traffic volumes compared with
Sydney Airport. This trend is anticipated to continue over the coming years as
Sydney Airport continues to face capacity issues. Capacity problems are expected
to be partly alleviated by the construction of a second Sydney airport, although it is
not expected to begin operations until the mid-2020s.
Regional airlines primarily operate near tourism or mining hubs. Remote mines and
tourist attractions, such as diving and national park locations, will generate demand
for scheduled flights. Queensland has a significant number of operators due to its
status as a major tourist destination, with numerous smaller companies providing
transport to islands off the coast. The Northern Territory's share of enterprises is
larger than its population share as it is also an important tourist destination.
Western Australia has many small players that transport workers to and from
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mining sites. Western Australia's share of industry enterprises has fallen slightly
over the past five years as mining investment has slowed.


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Competitive Landscape
Market Share
Concentration
Concentration in this industry is High
The Domestic Airlines industry exhibits a
high level of concentration as it is
dominated by two major companies:
Qantas and Virgin Australia. This situation
is not unique to Australia as the domestic
air transport sector is highly concentrated
in almost every country. This
concentration is due to the substantial costs associated with running an airline,
including financing aircraft purchases or leases, paying airport landing charges and
maintaining a large labour force. These costs are incurred prior to the delivery of a
service and are independent of output, discouraging new players from entering the
market. However, several small operators participate in the industry, such as
Regional Express and Alliance Aviation. These companies service regional areas
that are uneconomical for large airlines. These small players have lower overheads
as they fly smaller aircraft, which use less fuel, and typically lease their planes,
which reduces capital expenditure.
The price competition imposed by the industry's four major airlines acts as a
significant deterrent to new entries, in addition to suppressing existing players.
Several small-scale players operate in regional markets. However, travel has
increasingly been conducted between major urban hubs over the period. This trend
has been driven by the faster population growth among Australia's cities than in
rural areas. However, market share concentration has risen only marginally over the
past five years. Virgin Australia's significant downsizing during the COVID-19
pandemic, and likely smaller operating scale in 2021-22, has supported the market
share of smaller industry airlines. Most of these operators report negligible revenue
compared with major players. However, small, rural airlines serving FIFO miners
have mostly remained operational during the COVID-19 pandemic, while
commercial flight capacity has been greatly reduced.
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Key Success
Factors
IBISWorld identifies 250 Key Success Factors for a business. The most important for this
industry are:
Having links with suppliers: Airlines need to maintain good relations with travel agents
and other suppliers, such as airports. Travel agents can help attract contract customers,
while negotiating long-term pricing agreements with airports helps keep costs under
control.
Optimum capacity utilisation: Airlines need to select appropriate aircraft to match
expected demand on routes. This factor enables airlines to regulate capacity on specific
routes and enhance profitability across their network.
Ability to alter goods and services produced in favour of market conditions: Airlines
must be able to expand and contract capacity in line with market demand to maximise
revenue and profitability. This factor is important to ensure load factors remain high on all
domestic routes.
Economies of scale: Larger airlines can capitalise on the benefits of size by leveraging
cost efficiencies available in labour and purchase costs, and aircraft use.
Access to the latest available and most efficient technology and techniques: New
technologies, such as in-flight Wi-Fi and mobile check-in, can improve airline efficiency by
streamlining administrative processes. In addition, flying newer planes can reduce costs, as
they are generally more fuel-efficient.
Cost Structure
Benchmarks
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Profit
Several factors influence industry profitability,
including fuel prices, the value of the Australian
dollar, load factor and airfares. Higher fuel
prices tend to reduce profitability, as airlines are
unable to fully pass on cost increases to
customers due to strong industry competition.
An appreciating Australian dollar also affects
profitability, as more Australians opt for
international travel and fewer tourists visit
Australia due to the greater cost. However, these
negative demand effects can usually be offset
via a decline in the relative cost of aviation fuel,
which is imported. Load factor, which measures
how well an airline is filling its seats, also
indicates profitability. A low load factor
indicates that capacity utilisation is poor. Due to
the industry's high fixed costs, airlines that are
not maximising their passengers per flight are
less likely to be profitable.
Over the two years through 2018-19, cost-
cutting initiatives and increased load factors (as
inefficient routes were restructured) improved
industry profit margins. Capacity reductions also
resulted in airfares rising steadily over the same
period, boosting industry profitability. The
introduction of newer, more fuel-efficient aircraft
into the domestic market has also supported
profitability. Although aviation fuel prices are
projected to decline over the five years through
2021-22, this is primarily due to a sharp fall in
2019-20. Before the outbreak of COVID-19, fuel
prices trended upward, containing industry
profit. Fuel prices are expected to strongly rise
over the two years through 2021-22, restricting
margins. The industry reported a loss of 17.1%
of revenue in 2020-21 due to dire demand
conditions amid high fixed costs. The pressure
on margins is anticipated to significantly ease in
the current year. Although increasing demand is
projected to benefit airlines in 2021-22, the
industry is projected to remain loss-making.
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Wages
Over the past five years, airlines have focused
on upskilling staff, which has placed upward
pressure on the industry's average wage. A pilot-
skills shortage also contributed to the industry's
rising average wage until the outbreak of
COVID-19. Typically, industry firms have limited
scope to reduce staff, as a certain number of
employees are necessary for flight operations.
However, reduced flight capacity during the
COVID-19 pandemic has caused industry
employment to fall over the past five years.
Some employees have been placed on paid or
unpaid leave while capacity is low. These
employees are still included in the industry's
employment statistics. Leave payments are
reported as an expense and are therefore
included in the industry's wage costs. As a
result, industry wages are expected to increase
as a share of revenue over the five years through
2021-22.
Purchases
Purchases are a major industry expense and
include aviation fuel, route navigation charges,
landing fees and in-flight passenger expenses.
Aviation fuel accounts for a significant portion
of purchase costs for an airline and can
fluctuate substantially from year to year.
Aviation fuel prices largely follow the trend of
the world price of oil. Airlines can reduce fuel
costs through a variety of initiatives, such as
reducing aircraft weight using lightweight galley
equipment, and tailoring the amount of water on
flights to the trip length and number of
passengers. Hedging fuel contracts, which are
made to lock in a certain fuel price, can also
help reduce purchase cost volatility.
The world price of crude oil trended mostly
upward over the two years through 2018-19.
Over the same period, aviation fuel prices largely
followed the same trends. However, purchase
costs have deviated from oil and fuel price
trends over the past five years. Hedging
contracts, the use of more fuel-efficient aircraft
and rising airfares placed downward pressure
on purchase costs in revenue share terms over
the two years through 2018-19.
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Aviation fuel prices plummeted in 2019-20, as a
COVID-19-driven demand slump from global
manufacturing firms and the aviation sector
resulted in oversupply. Major oil-producing
nations, Saudi Arabia and Russia, temporarily
boosted production in an attempt to maintain or
gain market share in the global market, further
suppressing prices. Purchase costs are
anticipated to rise over the two years though
2021-22 amid increasing oil prices as global
demand mostly recovers. Overall, purchase
costs have marginally increased as a share of
industry revenue over the past five years.
Depreciation
Depreciation costs include the depreciation of
aircraft, aircraft parts, loading and unloading
equipment, communication equipment and
office equipment. New aircraft purchases over
the past decade have placed upward pressure
on depreciation costs. Airlines have acquired
new aircraft to enhance in-flight passenger
amenities and reduce fuel consumption, as
newer planes tend to be more fuel efficient.
Depreciation has risen as a share of revenue
over the past five years. Depreciation costs are
mostly fixed. Consequently, the sharp revenue
decline over the two years through 2020-21
caused depreciation costs to surge as a share
of revenue over the same period. However,
leasing arrangements have become more
common following the emergence of COVID-19
and subsequent industry downturn. In particular,
Virgin Australia has trended toward leasing
aircraft since being purchased by Bain Capital, in
an attempt to limit capital expenditure and
reduce short term costs. Qantas has postponed
the purchase of many new aircraft destined for
its Jetstar fleet. However, both major airlines are
expected to heavily invest in new aircraft over
the next decade.
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Other Costs
Other costs include maintenance, insurance
premiums, rent, utilities, administration costs,
sales and legal expenses, and marketing and
advertising expenses. These costs have
decreased over the past five years as industry
players have used technology, such as online
booking and ticketing, to reduce administrative
expenses. Maintenance costs are a notable
industry expense. These costs have increased
as a share of industry revenue over the past five
years. This is despite major airlines reducing the
variety of aircraft types in their fleet, to make
maintenance more streamlined and efficient.
Many airlines have taken the opportunity to
undertake major maintenance repair and
overhaul services to their grounded fleets during
the COVID-19 pandemic.
Basis of
Competition
Competition in this industry is High and Decreasing
The Domestic Airlines industry is highly competitive.
Most competition comes from within the industry, as airlines fight for market share.
To a lesser degree, competition also comes from alternative transport methods,
although air travel is often necessary due to the large distances between Australia's
capital cities and regional centres. Competition in the industry has decreased over
the past five years.
Internal competition
The strongest competition in the industry formerly occurred
between low-cost discount airlines, such as Jetstar and Tigerair,
where competition was largely based on price.
Domestic leisure travellers, the target market for these airlines, are highly price-
sensitive. However, Tigerair ceased operating in Australia in March 2020, leaving
Jetstar as the sole budget carrier in the industry. Virgin Australia's decision to retire
the Tigerair brand is expected to greatly in the low-cost carrier segment.
The premium end of the market was formerly less competitive than the budget
segment. Virgin Australia is expected to operate as a full-service airline once
demand conditions begin to normalise, offering some competition to the Qantas
brand. However, Virgin is unlikely to directly compete with Qantas over the short-
term as the smaller carrier attempts to recover from its administration period and
financial struggles. Virgins is anticipated to promote itself as a mid-market brand
but will look and feel closer to Qantas than Jetstar. Qantas is expected to grow in
market share terms due to Virgin Australia's downsizing, with reduced competition
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likely placing upward pressure on airfares over the next five years. Even before
COVID-19, some customers tended to be willing to pay more for Qantas fares due to
its long-standing reputation as a full-service economy and business class travel
provider, and its significant brand recognition. However, REX has leased several jet-
engine aircraft has indicated it will expand into new markets and flight routes. REX's
expansion is expected to moderate the decline in industry competition over the two
years through 2021-22.
Qantas also has an advantage in loyalty programs due to longevity, with over 12
million Frequent Flyer members, compared with 10 million for Virgin's Velocity
program. These loyalty programs help companies retain market share by offering
incentives based on an accumulative points system. However, the programs are not
exclusive and customers can be members of both. Qantas also hold the majority of
the corporate market, where employers purchase tickets. Competition for this
market has increased over the past five years, as Virgin has focused on rapidly
expanding its Velocity member numbers via extensive promotions.
Competition is less intense in the regional market. Regional Express Holdings, a
major player in this market, has many monopolistic routes across Australia. Qantas
and Virgin operate in the regional market through QantasLink and Virgin Australia
Regional Airlines. Most other small companies in the industry operate regional
flights. However, most do not compete directly and service different routes to the
vast number of regional hubs in Australia.
External competition
Substitute modes of transport such as road, rail or sea can also
affect the industry.
However, due to Australia's large size and low population density, air travel is almost
a necessity. The extent of Australia's landmass and the distance to travel were two
of the main reasons for commercial aviation commencing in Australia. For example,
Qantas was formed in 1920, making it the world's third-oldest airline. Competition
with other types of transport is generally steady and stems from factors other than
price, such as comfort, sightseeing and fear of flying.
Barriers to Entry Barriers to entry in this industry are High and Steady
The Domestic Airlines industry has high
entry barriers. This is due to several
factors, including the dominance of
existing players, the need to meet
significant regulatory requirements and
high initial sunken capital costs.
Capital and labour requirements
The industry's high level of capital
intensity is a substantial barrier to entry.
While initial start-up costs vary
Barriers to entry checklist
Competition High
Concentration High
Life Cycle Stage Mature
Technology Change High
Regulation & Policy Heavy
Industry Assistance Medium
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depending on the size and scope of operations, domestic airlines generally require
a large fleet of high-capacity aircraft to service planned routes. When Virgin
Australia entered the Australian market in 2000, it had two aircraft, one of which
was leased, reducing its initial capital outlay and subsequent depreciation costs. In
addition, aircraft require maintenance by appropriately qualified personnel to remain
compliant with the Civil Aviation Safety Authority's (CASA) regulations. Whether
industry players perform maintenance themselves or outsource it to other
companies, maintenance costs are a significant expense. A large and highly skilled
labour force is also required, with airlines requiring pilots and ground staff to
operate. This adds to initial start-up costs. Due to the large initial capital
investment, operators need to ensure high levels of coordination to avoid aircraft
downtime and achieve a profitable passenger load if they are to be successful.
Regulation
Industry regulation is also a significant barrier to entry, as it imposes additional
costs and operational restraints on a possible entrant. Airlines operating in
Australia are required to hold an Air Operators Certificate under the Civil Aviation
Act 1988. This certificate is issued by CASA on behalf of the Federal Government.
All domestic airlines need to meet the operating standards set out in CASA
legislation, which includes safety, maintenance, flight staff qualifications and other
operating conditions.
Airport competition
Securing terminal space at the airports is one of the most formidable barriers new
entrants face in servicing the lucrative commercial routes by large population
centres. Many airports have leased out these terminals, especially those in Sydney
and Melbourne, on long-term leases to Qantas and Virgin. In addition, the land
adjacent to these terminals is leased out to the major airlines to provide aircraft
hangars and service bays. Over the past five years, some airports have introduced
multiple airline check-ins and gateways to retain their established tenants. For
example, Melbourne Airport opened its new Terminal 4 in August 2015 to better
accommodate Jetstar and Tigerair's operations. In addition, many low-cost
operators have opted to fly out of smaller airports, such as Avalon Airport in
Melbourne, as they generally have lower fees and more freely available terminal
space.
Industry
Globalization
Globalization in this industry Low and Increasing
The Domestic Airlines industry displays low globalisation. The industry does not
engage in international trade, as firms only provide flights within Australia. Foreign
ownership in the industry is moderate, despite Virgin's acquisition of Tiger Airways
in 2013 reducing the number of foreign operators. This is because many foreign
airlines have investments in the industry's two major players, Qantas and Virgin,
although foreign ownership in Qantas is limited to 49% by the Federal Government.
In addition, international airlines' access to domestic routes is tightly controlled by
federal and state governments.
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Industry globalisation has risen over the past five years. Domestic airlines have
expanded their alliances and codesharing arrangements with international carriers
to benefit from a rise in the number of foreign tourists flying into Australia on
international airlines. This is because domestic airlines often carry passengers on
the final leg of their journey from interconnecting international flights. For example,
Virgin has a codesharing arrangement with US-based Delta Airlines, giving Virgin
more direct access to passengers travelling from the US. In August 2015, this
arrangement was re-authorised by the ACCC for a further five years, highlighting the
importance of these alliances for domestic operators. In addition, Qantas entered
into a codesharing agreement with Air New Zealand in October 2018. Under this
agreement, the two airlines offer connecting services within their respective
domestic markets.
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Major Companies


Major Players QANTAS AIRWAYS LIMITED
Market Share: 63.8%
Qantas Airways Limited is an Australian-
owned, publicly listed airline. Established in
1920 as the Queensland and Northern
Territory Aerial Services (Qantas), the
company was Australia's first airline. Qantas is
the dominant player in both the Domestic
Airlines industry and the International Airlines
industry, due to its established presence as
Australia's national carrier. The company
operates in the industry through its extensive
domestic flight network, transporting
passengers and freight with its Qantas, Jetstar and QantasLink carriers.
Qantas entered the Domestic Airlines industry in 1992, after the company was given
regulatory approval and acquired Australian Airlines. In 2004, the firm launched low-
cost carrier Jetstar, which allowed it to differentiate its premium Qantas brand with
a low-cost alternative. The firm also owns QantasLink, which is a collection of
several smaller regional carriers including Sunstate Airlines and Eastern Australia
Airlines. Qantas is a founding member of Oneworld, an airline alliance aimed at
catering to the needs of the world's frequent flyers. Oneworld provides Qantas
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customers with access to hundreds of destinations and airport lounges around the
world. This alliance supports Qantas's domestic activities as it enhances the
company's exposure to international travellers, who often transfer to domestic
flights at major Australian airports.
Qantas's position in the domestic market derives largely from its extensive history
in Australia, and its reputation as a safe and full-service carrier. After the company's
capacity growth ended in 2013-14, Qantas' domestic operations focused on
retaining its advantage in corporate markets and targeted growth among small
business and leisure travellers. In the domestic market, Qantas is primarily focusing
on improving margins through managing capacity and improving cost efficiencies.
Over the long term, Qantas is also anticipated to benefit from a codeshare
arrangement with Air New Zealand, which commenced in October 2018, with each
airline offering codeshare flights within their respective domestic markets.
Financial performance
Qantas Airways Limited's industry-specific revenue is expected to decline at an
annualised 3.4% over the five years through 2021-22, to $6.1 billion. The company
has outperformed the wider industry over the past five years. Qantas's industry-
specific revenue rose sharply over the two years through 2018-19. Jetstar's growth
outpaced the Qantas brand as weak income growth encouraged leisure travellers to
seek out lower-priced airfares. Nevertheless, strong domestic tourism growth
supported the company's industry-specific revenue. Both major players maintained
capacity and focused on improving load factors over the two years through
2018-19. While primarily a measure to improve profitability, airfare price growth
supported Qantas' revenue gains. Qantas' revenue declined significantly over the
two years through 2020-21, as the COVID-19 pandemic restricted travel volumes.
However, Qantas' revenue decreased at a much slower rate than Virgin's. As a
result, Qantas's market share is anticipated to sharply rise over the two years
through 2021-22.
Qantas's restructuring has greatly benefited the profitability of its domestic
operations. The firm posted a record underlying profit from domestic activities in
2017-18, due to the restructure, capacity optimisation and low fuel prices. Qantas's
subsidiary, Jetstar, has gained market share over the past five years. The carrier's
position as a low-cost airline has benefited from Virgin Australia's shift towards a
full-service airline. Nevertheless, Qantas's industry-specific profitability has fallen
over the past five years, due to weak demand during the COVID-19 pandemic. This
includes a significant loss of 21.5% of revenue in 2020-21.
Qantas Airways Limited - industry segment performance*
Year Revenue Growth
($b) (% change)
2011-12 7.29 N/C
2012-13 7.50 2.9
2013-14 7.09 -5.5
2014-15 7.20 1.6
2015-16 7.21 0.1
2016-17 7.22 0.1
2017-18 7.77 7.6
2018-19 8.07 3.9
2019-20 6.20 -23.2
2020-21 3.88 -37.4
2021-22 6.06 56.2
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Source: IBISWorld
Note: *Estimate
VIRGIN AUSTRALIA HOLDINGS PTY
LIMITED
Market Share: 25.6%
Virgin Australia Holdings Limited is an
Australian airline that was formerly listed on
the ASX. The firm began operations in
Australia under the Virgin Blue Airlines brand
in 2000, offering low-cost domestic air travel
between capital cities. The company had
support from federal, state and local
governments, which provided incentives for
Virgin to service routes that would otherwise
be subject to high airfares. In 2011, the company combined the operations of its
Australian-based carriers Virgin Blue, Pacific Blue, Polynesian Blue and V Australia
into Virgin Australia.
After listing on the ASX in December 2003, Virgin focused on winning a greater
share of the lucrative corporate market. The company introduced a new frequent
flyer program, online and self-service check-in, and flexible airfares to attract
business travellers. Virgin also unveiled new airport lounges in 2006, which offered
an enhanced range of business facilities and services. Virgin Australia's focus on
the high-value business travel market was designed to compensate for increasing
competition for leisure travellers from Qantas's low-cost subsidiary, Jetstar. The
firm also has codeshare agreements with several major international airlines,
including Etihad Airways and Singapore Airlines. However, the company's
codeshare agreement with Air New Zealand ended in 2018. These agreements are
part of Virgin Australia's strategy to build an international network that
complements its domestic business.
Virgin Australia's market share increased following its successful takeover of
SkyWest Airlines in April 2013. SkyWest was subsequently rebranded as Virgin
Australia Regional Airlines. This move positioned Virgin to expand in the domestic
aviation sector, as Virgin gained control of a significant number of regional routes to
supplement its extensive range of domestic commercial routes. The acquisition
was also a competitive move to win market share from QantasLink, Qantas's
regional operator. Virgin acquired 60.0% of low-cost airline Tiger Airways in July
2013, before acquiring the remaining 40.0% in February 2015. Following its initial
acquisition in 2013, Virgin rebranded Tiger Airways as Tigerair Australia. Virgin
purchased Tiger to boost its low-cost air travel services, as the Virgin brand
continued to shift from a low-cost to full-service airline. However, the Tigerair brand
was retired in March 2020, soon before the company entered into voluntary
administration. Bain Capital has maintained Tigerair's Air Operator Certificate,
leaving the door open for the brand to be reintroduced once demand conditions
improve after the COVID-19 pandemic has been contained.
Virgin Australia was placed into administration on 21 April 2020. The airline had
been reporting statutory losses in most reporting periods and had accumulated
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significant debt. Due to the sharp demand decline caused by the COVID-19
outbreak, the company was unable to remain viable without assistance. The airline
remained partially operational during its administration period. On 26 June 2020,
Bain Capital reached a purchase agreement for Virgin Australia with its
administrators. Bain Capital is a United States-based private investment firm. The
firm took ownership of Virgin Australia on 17 November 2020 upon the airline's
delisting from the ASX.
Financial performance
Virgin Australia Holdings Limited's industry-specific revenue is expected to decline
at an annualised 8.3% over the five years through 2021-22, to $2.4 billion. The
company has underperformed the industry over the period. This result is due to the
firm's significant revenue decline during the COVID-19 pandemic. In addition, the
airline is expected to operate on a moderated scale compared with 2018-19, even
as demand conditions likely improve during the current year. Consequently, the
company is expected to lose market share to Qantas over the two years through
2021-22. However, Virgin Australia was slightly outperforming Qantas before the
outbreak of COVID-19. Virgin had been undergoing a long-term strategy to gain
market share from Qantas. Virgin's outperformance of Qantas was primarily due to
more aggressive capacity growth, particularly by the Tigerair brand.
Like Qantas, Virgin has focused on improving load factors on domestic flights since
2015. This strategy aided profitability growth over the two years through 2018-19.
Increased load factors resulted in greater scale economies, particularly for the
premium Virgin brand. Virgin aggressively targeted Qantas's business customer
base at the beginning of the period by offering lower prices and expanding its flight
capacity. Tigerair had been demonstrating strong domestic revenue growth, and
domestic profit margins had also trended upwards over the period. Despite Virgin
Australia's broader financial struggles, the company had been mostly profitable in
the Domestic Airlines industry over the decade through 2018-19. However, weak
demand resulted in Virgin Australia posting an industry-specific loss of 13.1% in
2020-21.
Virgin Australia Holdings Pty Limited - industry segment performance*
Year Revenue Growth
($b) (% change)
2011-12 2.87 N/C
2012-13 2.90 1.0
2013-14 2.96 2.1
2014-15 3.40 14.9
2015-16 3.60 5.9
2016-17 3.74 3.9
2017-18 4.03 7.8
2018-19 4.23 5.0
2019-20 3.18 -24.8
2020-21 1.52 -52.2
2021-22 2.43 59.9
Source: IBISWorld
Note: *Estimate
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Other Players While two major airlines dominate the Domestic Airlines industry, several smallerplayers service regional areas. These airlines generally provide ad-hoc charter
services, but are included in the industry as they also perform scheduled flights for
a variety of purposes. For example, some of these smaller airlines operate
scheduled corporate travel services and short-term labour transport. In addition,
some logistics companies provide domestic airfreight services. Toll Holdings
Limited (Toll), an integrated logistics company, has an Air Express arm that
specialises in time-critical airport-to-airport freight transport. However, players like
Toll have limited market share, as most the industry's revenue is derived from
passenger transport, with most airfreight also transported in the holds of passenger
aircraft. Other prominent companies in the industry include Regional Express and
Alliance Airlines.
REGIONAL EXPRESS HOLDINGS LIMITED
Market Share: 2.2%
Regional Express Holdings Limited (REX) provides scheduled and charter air
transportation across regional Australia. Rex was formed in August 2002 by a pilot-
led consortium under the company Australiawide Airlines. Rex represents the
merger of former Ansett country carriers Kendell and Hazelton, which were
acquired by Australiawide Airlines in April 2002. The company listed on the ASX in
November 2005. Subsequently, the company established strong interconnections
with Virgin Australia, Qantas and Singapore Airlines, giving REX access to a steady
stream of passengers and freight. The airline has been undertaking a strategic shift,
entering into the jet-engine market in 2020-21 and beginning to conduct larger
commercial flights between capital cities. REX has leased six jet-engine aircraft to
fly routes between capital cities. Prior to this, the company's fleet consisted of 60
Saab 340 (prop-plane) aircraft. As a result, Rex is expected to report increasing
market share over the next five years.
ALLIANCE AVIATION SERVICES LIMITED
Market Share: 0.9%
Alliance Airlines in an air charter company that also provides scheduled services.
The firm, based at Brisbane International Airport, generates most its revenue from
providing fly-in fly-out (FIFO) transport for the mining and energy sectors across
Australia. The airline operates routes to prominent mining locations such as
Olympic Dam in South Australia. In August 2016, Alliance Aviation finalised a
partnership with Virgin Australia. Alliance Airlines' participation in the industry now
occurs through codeshare and flight operations of behalf of Virgin. For example,
scheduled flights to Bundaberg, Gladstone or Port Macquarie are booked through
Virgin, but are operated by Alliance Airlines. The partnership also allows the firms to
bid together on new contracts with resources companies, combine spare parts, and
share costs relating to maintenance and ground services.
Over the past five years, the airline has focused on securing FIFO contracts to
provide a steady stream of revenue. Alliance Aviation has operated dedicated
scheduled flights for BHP since 2002 and the most recent contract sees the
partnership continue into 2019. In November 2015, the company purchased
numerous Fokker aircraft from Austrian Airlines, a subsidiary of Lufthansa, which
will provide readily available spare parts for the company's existing fleet.
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Operating Conditions


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Capital Intensity The level of capital intensity is High
The Domestic Airlines industry is highly
capital-intensive. For every dollar spent on
wages in 2021-22, industry operators will
invest an estimated $0.59 in capital
equipment. The industry's capital intensity has
increased over the past five years as firms
have invested in new aircraft that are safer,
more fuel-efficient and provide enhanced
passenger comfort. While airlines can lease
planes to reduce capital costs, larger airlines
generally own most of their planes as it is
cheaper than leasing over the long term, and
their economies of scale allow them to receive
bulk discounts from aircraft manufacturers.
Conversely, smaller operators are more likely
to lease their planes as this allows greater
flexibility to adjust fleet capacity on their
routes, which are typically regional and more
likely to face significant demand fluctuations.
The industry's capital spending is expected to
increase over the next five years. Qantas has
indicated it will invest heavily in a renewal of
its domestic fleet, in particular, those under
the Jetstar brand. This was meant to occur in
calendar year 2020 but has been postponed due to the shock to the aviation sector
resulting from the COVID-19 pandemic. Virgin was also indicating it was going to
reinvigorate its domestic fleet. However, the company is now planning to reduce the
number and type of aircraft in its fleet to reduce short-term costs. Virgin is
anticipated to increase its fleet size from 2022-23, as demand conditions improve.
Despite the industry's high capital intensity, it also has substantial wage costs as
labour is required in many areas of domestic airline operation. Many industry labour
functions require skilled workers, such as pilots, which command high wages.
Labour costs are also traditionally high due to significant unionisation among airline
employees. Industry labour inputs are projected to increase over the next five years
as rising discretionary incomes boost industry demand. Consequently, industry
operators are anticipated to increase capacity over the period. However, new
technologies, such as newer aircraft and streamlined airline administrative systems,
are also forecast to reduce operators' non-flying staff requirements over the next
five years, limiting growth in total wage costs.
Technology And
Systems
Potential Disruptive Innovation: Factors Driving Threat of Change
Level Factor Disruption Description
Moderate MarketConcentration Potential
A ranked measure of the largest core
market for the industry. Concentrated core
markets present a low-end market or new
market entry point for disruptive
technologies to capture market share.
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Level Factor Disruption Description
Low InnovationConcentration Unlikely
A measure for the mix of patent classes
assigned to the industry. A greater
concentration of patents in one area
increases the likelihood of technological
disruption of incumbent operators.
Low Rate of Entry Unlikely
Annualized growth in the number of
enterprises in the industry, ranked against
all other industries. A greater intensity of
companies entering an industry increases
the pool of potential disruptors.
Very Low Rate ofInnovation Very Unlikely
A ranked measure for the number of
patents assigned to an industry. A faster
rate of new patent additions to the
industry increases the likelihood of a
disruptive innovation occurring.
Very Low Ease of Entry Very Unlikely
A qualitative measure of barriers to entry.
Fewer barriers to entry increases the
likelihood that new entrants can disrupt
incumbents by putting new technologies
to use.
The industry is experiencing a low level of both the rate of new patents and the
concentration of patents in the industry. This creates an environment where the
threat of new technologies driving disruption is low.
There are both significant barriers to entry and a low rate of new entrants in this
industry. This combination of factors dampens the threat of innovative players
disrupting the industry structure.
The Domestic Airlines industry is highly regulated, which limits the
extent to which new technology can disrupt operations and industry
players.
Industry entry barriers are also high, which limits the entry of new disruptive
operators. However, steady investment in technology has been reported over the
long term. These investments mostly pertain to aircraft and back-end operations.
Newer aircraft have been placed into domestic operations over the past five years,
with a decline in fuel prices facilitating aircraft purchases. For instance, Qantas has
introduced several Boeing 737-800s into domestic services over the past five years.
However, these aircraft are not new, with most being about eight to ten years post
construction. New aircraft such as the Boeing 787-9 Dreamliner are used for
international services. Although domestically used aircraft often undergo
refurbishment before becoming operational, the absence of new aircraft in the
industry has limited the impact of technological disruption over the past five years.
The focus of innovative technologies has been on increasing airline efficiencies and
improving customer experiences. Features such as in-flight Wi-Fi have been
introduced on domestic routes to boost customer satisfaction. In addition, self-
check-in functions have become more common, reducing the industry's labour-
reliance. The use of sophisticated data analytics software has also increased, with
airlines using insights to assist with pricing, route and capacity strategies.
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The level of technology change is High
The Domestic Airlines industry is characterised by a high level of
technology change.
Most of the industry's technologies are imported from overseas, particularly the
United States and Europe, as this is where major aircraft manufacturers, such as
Boeing and Airbus, are located. Advancements in technology are used to decrease
costs for domestic airlines by boosting aircraft and airline operational efficiency.
New technology is also used to attract customers. Significant technology changes
include the increasing use of fuel-efficient and higher capacity aircraft, online
booking and check-in, and in-flight Wi-Fi.
Aircraft efficiency
Over the past decade, airlines have focused on increasing their
aircraft fleet's fuel efficiency to reduce costs and meet
environmental requirements.
The most important tool to achieve these goals is aircraft design, as lighter, more
technologically advanced aircraft use less fuel. For example, many airlines have
purchased major aircraft manufacturer Boeing's 787 Dreamliner over the past five
years. Boeing designed the 787 to provide airlines with greater fuel efficiency, with
the plane consuming up to 20% less fuel than the similar-size Boeing 767, mainly
due to weight-saving carbon fibre being used in its fuselage. This factor is
consistent with an industry-wide trend to decrease fuel costs, with firms
progressively retiring older, less-efficient aircraft. The 787 also incorporates health-
monitoring systems that allow the plane to self-monitor and report maintenance
requirements to ground-based computer systems.
Investment in new aircraft is expected to continue over the next five years. Qantas
is expected to purchase over 100 aircraft over the period, primarily for domestic
use. Aircraft being considered, as at October 2021, include the Boeing 787 MAX and
Airbus A320neo or A321neo. These narrow-body aircraft are well-suited to servicing
major domestic routes. Qantas is seeking bring in newer aircraft to reduce per-flight
fuel consumption. In addition to reducing fuel costs, airlines are aiming to cut fuel
consumption to lower carbon emissions.
Newer aircraft also have advantages for passengers, as they tend to have a greater
range of on-board amenities, like entertainment systems and internet access.
Additionally, new aircraft operate with lower cabin pressure and reduced noise,
enhancing passenger comfort. Improved onboard space utilisation, which allows
more seats on each aircraft and increased leg room, benefits both airlines and
consumers.
Airline efficiency
Technological improvements, particularly in administration, have
streamlined the operational efficiency of airlines over the past five
years.
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These include online booking, payment, scheduling, check-in and other functions
that can be automated, allowing passengers to perform these tasks themselves.
These factors have eliminated costs related to paper and other staff administration
activities. Other technological advances include check-in self-serve kiosks and
barcoded boarding passes. Increased smartphone penetration has allowed for
mobile check-in, and live monitoring of aircraft arrival and departure times.
Airlines have also begun to use big data, which will become more prominent over
the next five years. Big data involves collecting and analysing data to ascertain and
predict consumer behavioural patterns. Airlines already have customers' personal
data such as purchase history, checked luggage, destinations and in-flight choices.
Firms can then use this data to personalise services and product offerings,
including discount deals, to improve customer satisfaction and increase brand
loyalty. Big data can also predict total demand for each flight path, accounting for
seasonality. This factor will help airlines optimise routes and pricing, improving
profitability.
Revenue Volatility The level of volatility is Very high
Note: Revenue growth and decline reflective of 5-year annualized trend. Y-axis is in
logarithmic scale. Y-axis crosses at long-run GDP. X-axis crosses at high volatility
threshold.
The Domestic Airlines industry has exhibited very high revenue
volatility over the past five years.
However, this result is primarily due to COVID-19, with revenue volatility mostly
being moderate most of the decade before the pandemic. In a typical environment,
fluctuations in demand from travellers, price competition between airlines and the
price of inputs, such as fuel, all contribute to revenue volatility. For example, during
periods of economic uncertainty, business and leisure travellers are more likely to
defer domestic travel, as they seek to reduce expenditure.
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Changes in world oil prices also contribute to volatility, as fuel is one of the
industry's largest costs. When fuel costs are high, prices for air travel can rise as
industry operators pass on some of the extra cost to passengers to maintain
profitability. Conversely, when the oil price falls, as it did in 2015-16, airfares can
become cheaper. However, airlines do not always reduce airfares when fuel prices
drop as they benefit from the rise in profit margins. In addition, airlines often hedge
to lock in a certain fuel price, which can cause a lag between an oil price drop and a
change in airfare prices.
Generally, price declines are more closely associated to airfare price competition.
The end of the capacity war between Virgin and Qantas has contributed to declining
capacity on key domestic routes. Although this has placed upwards pressure on
airfares, total revenue derived from domestic travellers has declined. These
fluctuations in airfares contribute to the industry's moderate revenue volatility.
Regulation &
Policy
The level of regulation is Heavy and is Steady
The Domestic Airlines industry is heavily regulated and this trend
has remained steady over the past five years.
Domestic airlines are not required to gain approval from the Foreign Investment
Review Board to operate in Australia. However, the Federal Government regulates
foreign ownership for domestic airlines. Domestic airlines were only allowed 25.0%
individual foreign ownership and 35.0% total foreign ownership. In December 2009,
the government eased these restrictions to allow up to 100% foreign ownership of
domestic airlines, subject to wider foreign investment rules. For international
airlines, including Qantas, the limit remains at 49.0% foreign ownership. Airlines are
increasingly looking for shared agreements and joint-venture deals with foreign
airlines, as opposed to foreign ownership, to improve revenue and profit. Airline
alliances are subject to ACCC approval, since monopolistic routes could occur,
especially those connecting to international flights operated by the proposed
partner airline, given the limited number of approved air routes in and out of
Australia.
Australian regulators
Several aviation regulators police the operations of domestic
airlines to ensure safety and efficiency of domestic airline
operations.
Airservices Australia is a government-owned corporation set up to provide safe
management of air traffic control and related airside services to the aviation sector.
The air traffic operation covers all of Australia's airspace and international airspace
in the Pacific and Indian oceans.
The Civil Aviation Safety Authority was established in 1995 as an independent
statutory authority under the Civil Aviation Act 1988. Its purpose is to enhance and
promote aviation safety through regulation and by encouraging the industry to
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deliver high standards of safety. The organisation provides safety education and
training programmes.
Modern slavery act
In November 2018, the Federal Government passed the Modern
Slavery Act 2018.
The act, which came into force on 1 January 2019, is a new reporting requirement
for larger Australian businesses. Companies that generate an annual consolidated
revenue of at least $100.0 million will have to report on how they act to mitigate the
risks of modern slavery in their operations and supply chains. The first reports will
relate to 2018-19, with most reports being released in 2020. The NSW Government
is also considering its own state-based version of the report, which would make
businesses with consolidated annual revenue of at least $50.0 million have to
report. The NSW Modern Slavery Act 2018 was due to come into force on 1 July
2019, but was delayed for further consultation.
The industry's four largest players are likely to be subject to the act's mandatory
reporting standards, as they each report over $100.0 million revenue per year.
Therefore, these operators are expected to report modest rises in due diligence
costs. Food sourcing for in-flight catering and airport lounges is a potential area of
concern for domestic airlines. Some Australian farms have been accused of
subjecting migrant workers to slavery-like conditions. This includes claims by
former employees of businesses paying below the minimum wage. However, high
industry regulation, coupled with strict regulation in many upstream industries,
limits airlines' exposure to modern slavery risks.
Industry
Assistance
The level of industry assistance is Medium and is Increasing
The industry receives typically receives minimal assistance.
Major domestic airlines do not generally receive any direct assistance in the form of
subsidies or grants from the government. However, regional air operators can apply
for subsidies under several different schemes that are designed to ensure
communities in regional and remote locations have access to air transport. One
scheme is the Remote Air Services Subsidy Scheme, which subsidises a regular
weekly passenger and goods air transport service to remote areas that are difficult
to access through other transport types.
However, industry assistance has strongly increased over the past five years.
Domestic airlines have received significant government assistance during the
COVID-19 pandemic. Qantas, Virgin Australia and REX have all received significant
income via the JobKeeper payment scheme. For instance, Qantas is estimated to
have received $726 million in JobKeeper payments. Industry operators also
benefited from over $150 million in assistance via the Domestic Aviation Network
Support program and the Regional Airline Network Support program. Part of these
programs' mechanism was an underwriting of flights by the Federal Government to
ensure a baseline capacity on domestic routes for use by approved workers, while
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state border restrictions largely restricted travel. The Federal Governments $1.2
billion scheme to subsidise domestic airfares during the second half of 2020-21
also supported industry revenue during the COVID-19 pandemic.
Federal and state government initiatives to promote tourism in Australia have
boosted demand for domestic air travel from both Australian residents and
international tourists travelling to Australia. In addition, the level of government
regulation in regards to foreign ownership assists domestic investors in
maintaining control over domestic airlines. The major domestic airlines are
members of the International Air Transport Association (IATA). The IATA provides
global airlines with advice on cost savings and technology implementation, helps
formulate regulation and policy, and promotes aviation safety.
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Key Statistics
Industry Data
Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic
Demand
($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m)
2013–14 13,059 3,918 311 101 29,947 N/A N/A 2,899 N/A
2014–15 13,700 4,809 315 100 27,268 N/A N/A 2,898 N/A
2015–16 13,948 5,203 319 103 26,777 N/A N/A 2,985 N/A
2016–17 13,549 5,311 317 104 27,243 N/A N/A 3,069 N/A
2017–18 14,244 5,826 332 107 27,926 N/A N/A 3,137 N/A
2018–19 14,356 5,714 336 108 27,400 N/A N/A 3,076 N/A
2019–20 10,756 3,819 326 103 26,341 N/A N/A 2,562 N/A
2020–21 6,153 2,517 251 92 23,918 N/A N/A 1,935 N/A
2021–22 9,496 3,444 302 96 25,299 N/A N/A 2,309 N/A
2022–23 12,117 4,495 314 98 26,460 N/A N/A 2,728 N/A
2023–24 13,279 4,896 320 100 27,883 N/A N/A 2,897 N/A
2024–25 13,884 5,214 327 99 28,337 N/A N/A 2,987 N/A
2025–26 14,354 5,500 334 100 28,170 N/A N/A 3,074 N/A
2026–27 14,864 5,809 339 99 28,050 N/A N/A 3,153 N/A
Annual Change
Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic
Demand
(%) (%) (%) (%) (%) (%) (%) (%) (%)
2013–14 -5.59 -13.1 4 -1 4 N/A N/A -0.63 N/A
2014–15 4.90 22.7 1 -1 -9 N/A N/A -0.06 N/A
2015–16 1.80 8.18 1 3 -2 N/A N/A 3.01 N/A
2016–17 -2.87 2.08 -1 1 2 N/A N/A 2.81 N/A
2017–18 5.12 9.68 5 3 3 N/A N/A 2.23 N/A
2018–19 0.78 -1.93 1 1 -2 N/A N/A -1.96 N/A
2019–20 -25.1 -33.2 -3 -5 -4 N/A N/A -16.7 N/A
2020–21 -42.8 -34.1 -23 -11 -9 N/A N/A -24.5 N/A
2021–22 54.3 36.9 20 4 6 N/A N/A 19.3 N/A
2022–23 27.6 30.5 4 2 5 N/A N/A 18.2 N/A
2023–24 9.59 8.90 2 2 5 N/A N/A 6.18 N/A
2024–25 4.54 6.50 2 -1 2 N/A N/A 3.11 N/A
2025–26 3.38 5.48 2 1 -1 N/A N/A 2.90 N/A
2026–27 3.55 5.62 1 -1 -0 N/A N/A 2.58 N/A
Key Ratios
Year IVA/Revenue Imports/Demand Exports/Revenue Revenue per
Employee
Wages/Revenue Employees per
estab.
Average Wage
(%) (%) (%) ($'000) (%)
2013–14 30.0 N/A N/A 436 22.2 96.3 96,808
2014–15 35.1 N/A N/A 502 21.1 86.6 106,264
2015–16 37.3 N/A N/A 521 21.4 83.9 111,473
2016–17 39.2 N/A N/A 497 22.6 85.9 112,645
2017–18 40.9 N/A N/A 510 22.0 84.1 112,343
2018–19 39.8 N/A N/A 524 21.4 81.5 112,266
2019–20 35.5 N/A N/A 408 23.8 80.8 97,248
2020–21 40.9 N/A N/A 257 31.4 95.3 80,885
2021–22 36.3 N/A N/A 375 24.3 83.8 91,264
2022–23 37.1 N/A N/A 458 22.5 84.3 103,103
2023–24 36.9 N/A N/A 476 21.8 87.1 103,891
2024–25 37.6 N/A N/A 490 21.5 86.7 105,410
2025–26 38.3 N/A N/A 510 21.4 84.3 109,116
2026–27 39.1 N/A N/A 530 21.2 82.7 112,421
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Additional Resources
Additional
Resources
Bureau of Infrastructure and Transport Research Economics
http://www.bitre.gov.au
International Air Transport Association
http://www.iata.org
Civil Aviation Safety Authority
http://www.casa.gov.au
Industry Jargon AIRSIDE SERVICES
Services and facilities that are provided to aircraft by an airport or other entities. These
include access to facilities like runways or providing services like firefighting and
telecommunications.
INTERNATIONAL AIR TRANSPORT ASSOCIATION (IATA)
An organisation that assists global airlines with cost savings, technology implementation
and regulatory pressures.
LOAD FACTOR
An indicator of how efficiently an airline is using its available capacity, by dividing revenue
passenger kilometres by available seat kilometres.
REVENUE PASSENGER KILOMETRES
A measure of airline passenger capacity obtained by multiplying the number of passengers
on each flight by the flight's distance.
Glossary Terms BARRIERS TO ENTRY
High barriers to entry mean that new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an industry.
CAPITAL INTENSITY
Compares the amount of money spent on capital (plant, machinery and equipment) with
that spent on labour. IBISWorld uses the ratio of depreciation to wages as a proxy for capital
intensity. High capital intensity is more than $0.333 of capital to $1 of labour; medium is
$0.125 to $0.333 of capital to $1 of labour; low is less than $0.125 of capital for every $1 of
labour.
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CONSTANT PRICES
The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation
using the current year (i.e. year published) as the base year. This removes the impact of
changes in the purchasing power of the dollar, leaving only the 'real' growth or decline in
industry metrics. The inflation adjustments in IBISWorld’s reports are made using the
Australian Bureau of Statistics' implicit GDP price deflator.
DOMESTIC DEMAND
Spending on industry goods and services within Australia, regardless of their country of
origin. It is derived by adding imports to industry revenue, and then subtracting exports.
EMPLOYMENT
The number of permanent, part-time, temporary and casual employees, working proprietors,
partners, managers and executives within the industry.
ENTERPRISE
A division that is separately managed and keeps management accounts. Each enterprise
consists of one or more establishments that are under common ownership or control.
ESTABLISHMENT
The smallest type of accounting unit within an enterprise, an establishment is a single
physical location where business is conducted or where services or industrial operations are
performed. Multiple establishments under common control make up an enterprise.
EXPORTS
Total value of industry goods and services sold by Australian companies to customers
abroad.
IMPORTS
Total value of industry goods and services brought in from foreign countries to be sold in
Australia.
INDUSTRY CONCENTRATION
An indicator of the dominance of the top four players in an industry. Concentration is
considered high if the top players account for more than 70% of industry revenue. Medium
is 40% to 70% of industry revenue. Low is less than 40%.
INDUSTRY REVENUE
The total sales of industry goods and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside the firm (such as commission
income, repair and service income, and rent, leasing and hiring income); and capital work
done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed
tangible assets are excluded.
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INDUSTRY VALUE ADDED (IVA)
The market value of goods and services produced by the industry minus the cost of goods
and services used in production. IVA is also described as the industry's contribution to GDP,
or profit plus wages and depreciation.
INTERNATIONAL TRADE
The level of international trade is determined by ratios of exports to revenue and imports to
domestic demand. For exports/revenue: low is less than 5%; medium is 5% to 20%; and high
is more than 20%. Imports/domestic demand: low is less than 5%; medium is 5% to 35%;
and high is more than 35%.
LIFE CYCLE
All industries go through periods of growth, maturity and decline. IBISWorld determines an
industry's life cycle by considering its growth rate (measured by IVA) compared with GDP;
the growth rate of the number of establishments; the amount of change the industry's
products are undergoing; the rate of technological change; and the level of customer
acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENT
Businesses with no paid employment or payroll, also known as nonemployers. These are
mostly set up by self-employed individuals.
PROFIT
IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s
profitability. It is calculated as revenue minus expenses, excluding interest and tax.
VOLATILITY
The level of volatility is determined by averaging the absolute change in revenue in each of
the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to
±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.
WAGES
The gross total wages and salaries of all employees in the industry.
Domestic Airlines in Australia I4902 November 2021
52 IBISWorld.com
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