AU INDUSTRY (ANZSIC) REPORT I4901
International Airlines in Australia
Nosedive: The COVID-19 outbreak has prompted revenue to plummet significantly
Tom Youl | April 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...................................................11
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.......................................................23
Business Locations..................................................... 23
Competitive Landscape...................................26
Market Share Concentration....................................... 26
Key Success Factors................................................... 26
Cost Structure Benchmarks........................................ 27
Basis of Competition................................................... 30
Barriers to Entry........................................................... 31
Industry Globalization..................................................32
Major Companies............................................34
Major Players............................................................... 34
Other Players................................................................42
Operating Conditions...................................... 43
Capital Intensity........................................................... 43
Technology And Systems........................................... 44
Revenue Volatility........................................................ 47
Regulation & Policy......................................................48
Industry Assistance..................................................... 50
Key Statistics..................................................51
Industry Data................................................................51
Annual Change.............................................................51
Key Ratios.................................................................... 51
Additional Resources...................................... 52
Additional Resources.................................................. 52
Industry Jargon............................................................52
Glossary Terms............................................................52
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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 International Airlines industry has been among the most severely affected by
the COVID-19 pandemic. The closure of international borders has resulted in
overseas travel volumes becoming negligible. Although airfreight services are
projected to offer some reprieve to industry operators, revenue is forecast to
decline by 67.2% in 2020-21. For more detail, please see the Current Performance
chapter.
• Industry profitability has been similarly negatively affected. Decreased demand is
expected to cause margins to be in strong negative territory in 2020-21. For more
detail, please see the Cost Structure Benchmarks chapter.
• The COVID-19 pandemic has strongly affected the industry's service segments.
The airfreight segment is anticipated to increase significantly as a share of revenue
in 2020-21. For more detail, please see the Products & Services chapter.
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About This Industry
Industry Definition The industry primarily transports passengers by air over scheduled routes thateither end or originate internationally. Airlines that provide scheduled international
air freight transport are also included in the industry.
Major Players Qantas Airways Limited
Singapore Airlines Ltd
Emirates Group
Qatar Airways Group Q.C.S.C.
Fedex Express Australia Pty Ltd
Cathay Pacific Airways Limited
Main Activities The primary activities of this industry:
International air passenger transport
International airfreight transport
Air transport terminal operation (except airports)
The major products and services in this industry:
Full-fare 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
Domestic Airlines in
Australia
Non-Scheduled Air Transport
in Australia
Travel Agency and Tour
Arrangement Services in
Australia
RELATED INTERNATIONAL INDUSTRIES
Global Airlines International 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
$8.2bn
Revenue
Annual Growth Annual Growth Annual Growth
2016-2021 2021-2026 2016-2026
-22.4% 29.7%
$-2.6bn
Profit
Annual Growth Annual Growth
2016-2021 2016-2026
-208.1%
-31.4%
Profit Margin
Annual Growth Annual Growth
2016-2021 2016-2026
-37.4%
52
Businesses
Annual Growth Annual Growth Annual Growth
2016-2021 2021-2026 2016-2026
-2.8% 5.2%
15,837
Employment
Annual Growth Annual Growth Annual Growth
2016-2021 2021-2026 2016-2026
-22.3% 28.9%
$2.3bn
Wages
Annual Growth Annual Growth Annual Growth
2016-2021 2021-2026 2016-2026
-19.4% 25.8%
Key External Drivers % = 2016-2021 Annual Growth
2.9%
World price of crude oil
-34.3%
International travel to Australia
-33.0%
International travel by Australians
0.2%
Consumer sentiment index
0.3%
Trade-weighted index
Industry Structure
POSITIVE IMPACT
Life Cycle
Growth
Barriers to Entry
High
MIXED IMPACT
Concentration
Medium
NEGATIVE IMPACT
Revenue Volatility
High
Capital Intensity
High
Industry Assistance
Low
Regulation
Heavy
Technology Change
High
Globalization
High
Competition
High
Key Trends
Growing global tourism supported the industry's expansion
over the three years through 2018-19
The COVID-19 pandemic has limited industry activity, with
airfreight offering support to airlines
The industry is anticipated to record a significant loss in
2020-21, due to travel restrictions
Once the COVID-19 pandemic is contained, the industry is
forecast to recover rapidly
Full-fare airlines have been working to differentiate their
service offering from low-cost carriers
International airline capacity is anticipated to increase to
cope with higher demand
The COVID-19 pandemic has resulted in industry revenue and
profitability plummeting
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Products & Services Segmentation
Full-fare passenger
transport
9.0%
Low-fare passenger
transport
0.2%
Freight transport
90.4%
Other services
0.4%
International Airlines
Source: IBISWorld
Major Players % = share of industry revenue SWOT
STRENGTHS
High & Steady Barriers to Entry
Growth Life Cycle Stage
Low Imports
High Revenue per Employee
WEAKNESSES
Low & Steady Level of Assistance
High Competition
High Volatility
Low Profit vs. Sector Average
High Customer Class Concentration
High Product/Service Concentration
High Capital Requirements
OPPORTUNITIES
High Revenue Growth (2021-2026)
High Performance Drivers
World price of crude oil
THREATS
Very Low Revenue Growth (2005-2021)
Low Revenue Growth (2016-2021)
Trade-weighted index
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Executive
Summary
Airlines from different countries operate in the International Airlines
industry.
While many airlines, such as Emirates and Singapore Airlines, have a significant
market presence in Australia, few foreign airlines have local incorporated
subsidiaries. As a result, any airline that flies passengers or freight to or from
Australia is included in the industry.
The number of people travelling to and from Australia grew strongly over the three
years through 2018-19, mostly due to increased tourism from countries in the Asia-
Pacific region and from the United States. The growing popularity of Australia as a
tourist destination has benefited international airlines and given new entrants the
chance to capitalise on increased demand. However, the COVID-19 pandemic is
expected to significantly hinder the industry over the two years through 2020-21,
with international travel almost stopping. Industry revenue is anticipated to decline
by 67.2% in the current year. Overall, revenue is expected to decline at an annualised
22.4% over the five years through 2020-21, to $8.2 billion.
Similar to revenue, the COVID-19 pandemic has caused a sharp decline in industry
profitability. The industry is expected to report a significant loss in the current year.
Airline operations incur high fixed costs, which are anticipated to surge as a share
of revenue over the two years through 2020-21. In addition, profit margins declined
over the three years through 2018-19 due to rising aviation fuel prices. However,
most airlines eased capacity growth and caused airfares to modestly rise over the
two years through 2018-19, partially limiting declines in profitability. Industry profit
is expected to fall sharply over the two years through 2020-21, as the COVID-19
pandemic severely reduces international air travel.
Industry revenue is projected to increase at an annualised 29.7% over the five years
through 2025-26, to $30.2 billion. Once the COVID-19 pandemic is contained,
industry revenue is anticipated to grow strongly. International travel has strong
underlying demand and has traditionally recovered quickly after periods of shock-
driven decline. However, the global economic downturn is projected to further delay
the industry's recovery. In addition, international travel will likely remain restricted in
2021-22 as vaccine rollout programs continue. Exempted travel routes, such as
trans-Tasman flights, and airfreight services are forecast to offer some relief to
airlines over the short term.
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Industry Performance


Key External
Drivers
International travel to Australia
International travel to Australia measures the number of short-term international
travellers arriving in Australia. Most of these people travel to Australia by air due to
the country's remote location. As a result, increased international travel to Australia
tends to heighten demand for international air travel. International travel to Australia
is expected to fall in 2020-21.
International travel by Australians
International travel by Australians measures the number of Australian residents
leaving the country on short-term trips. Due to Australia's geographic isolation, most
Australians travel to other countries by air. As a result, a rise in the number of
Australians travelling overseas generally increases demand for international air
transport. International travel by Australians is expected to decrease in 2020-21.
Trade-weighted index
The value of the Australian dollar influences industry revenue. When the Australian
dollar appreciates, more Australian travellers generally travel overseas as it
becomes relatively cheaper. Conversely, visiting Australia becomes relatively more
expensive for international travellers. Because Australian travellers are the
industry's largest market, any rise in the Australian dollar benefits the industry. The
Australian dollar is expected to appreciate in 2020-21.
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World price of crude oil
Fuel is a significant cost for international airlines. When the price of crude oil
increases, the industry's purchase costs rise. Many airlines cannot pass increases
in fuel prices on to their customers due to competition from other airlines, which
subsequently constrains profit margins. Passing on costs by increasing airfares
tends to decrease demand for air travel, which negatively affects the industry's
performance. The world price of crude oil is expected to rise from a low base in
2020-21. However, aviation fuel prices will likely remain well below recent
benchmarks, representing an opportunity for the freight transport segment.
Consumer sentiment index
Consumer sentiment reflects individuals' opinions regarding their financial situation
and the general economy. When consumer sentiment is positive, Australian
consumers feel more optimistic about current and future economic conditions. As
a result, individuals are more likely to travel abroad, increasing industry demand.
Conversely, Australians tend to defer leisure travel and international holidays when
consumer sentiment is negative, which can threaten growth. Consumer sentiment
is expected to rise but remain negative in 2020-21.


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Current
Performance
The International Airlines industry's performance has varied
significantly between the period before and after the COVID-19
outbreak.
Over the three years through 2018-19, and through most of 2019-20, airlines
benefited from mostly positive operating conditions. Rising inbound tourist
numbers, particularly from Asia, prompted several airlines to expand their flight
routes to and from Australia. A weak Australian dollar further increased inbound
tourist numbers. Despite the weaker dollar, outbound passenger numbers were
growing strongly. However, the COVID-19 pandemic has severely constrained
international travel over the two years through 2020-21. Overall, industry revenue is
expected to decrease at an annualised 22.4% over the five years through 2020-21,
to $8.2 billion.
COVID-19
International airlines have faced substantial challenges over the two
years through 2020-21, due to the COVID-19 pandemic.
Air passenger travel to and from Australia has essentially stopped. According to the
Bureau of Infrastructure and Transport Research Economics (BITRE), international
passenger movements in December 2020 were 98.0% lower than in December
2019. Since March 2020, monthly passenger numbers have totalled below 100,000,
when up to 4.0 million is reported under typical conditions. Most nations, including
Australia, have imposed strict border controls in an attempt to limit the spread of
COVID-19. The progression of global COVID-19 cases has pushed back the opening
of international borders on several occasions. In March 2021, the Federal
Government announced the international border will remain restricted until at least
17 June 2021. As a result, revenue from passengers is expected to plummet in
2020-21. Some airlines have generated limited revenue through passenger travel for
migration or repatriation purposes. However, demand for airfreight has been less
affected.
Airfreight tonnage is expected to decline by 9.1% in 2020-21, following a 12.0%
decline in 2019-20. However, revenue from airfreight services has grown amid a
surge in airfreight prices. Some Australian exporters have reported price increases
of over 400%. The average price charged by some airlines has more than doubled,
benefiting industry airlines offering airfreight services. Global constraints on freight
supply have been placing upward pressure on shipping prices, including by air and
water. In response, some international airlines have maintained or increased
airfreight capacity during the COVID-19 pandemic, with a surge in online retail sales
partially stabilising demand. Government support initiatives such as the
International Freight Assistance Mechanism have also supported revenue from
airfreight activities over the past two years. Despite these factors, industry revenue
is expected to decline by 67.2% in 2020-21.
Passenger demand and freight
International airlines depend on demand from international
travellers visiting Australia and Australians travelling overseas.
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Due to Australia's geographic isolation, international air travel is the primary method
for getting to or from Australia. Prior to the COVID-19 pandemic, demand for
international air travel was high. According to the BITRE, total inbound and
outbound passenger numbers on international flights increased at an annualised
5.1% over the five years through 2018-19. However, revenue declined in 2016-17
due to a fall in international airfares. A surge in industry participation during the
previous year provided consumers with more scope to find cheaper flights. Over the
two years through 2018-19, capacity optimisation measures by most industry
operators caused airfares to rise, with ongoing passenger volume growth boosting
industry revenue over the same period. However, demand is expected to plummet
over the two years through 2020-21, as the COVID-19 pandemic significantly
disrupts global travel.
Increases in the number of inbound tourists from Asia had driven growth in
international visitors coming to Australia prior to the COVID-19 outbreak. Arrivals
from Australia's other large tourist markets, such as New Zealand and the United
States, were also increasing. Ongoing capital investment from tourism-related
businesses in Australia and marketing from Tourism Australia contributed to
increasing visitor numbers. However, international visitors from China declined in
2019, after a period of strong growth. This decline, which occurred prior to the
COVID-19 pandemic, was a worrying sign for many tourism-focused businesses,
including international airlines. However, strong growth from other markets, such as
India, Japan and the United States, underpinned the industry's strong performance
until January 2020.
Mail and freight services typically account for a small proportion of industry activity,
although international aircraft carry higher airfreight volumes than domestic
services. Freight volumes largely increased in line with passenger numbers prior to
the COVID-19 outbreak, as international airfreight is often transported in passenger
aircraft. However, some airlines operate dedicated freighters. Some cargo
companies, including United Parcel Service and FedEx, also participate in the
airfreight segment. Singapore Airlines and Qantas carry most airfreight in and out
of Australia, due to their global reach and extensive route networks.
Prices and costs
Budget carriers, such as Singapore Airline's subsidiary Scoot
Tigerair and Malaysia-based AirAsia X, extended their Australian
route networks and passenger capacities over the first half of the
period.
This trend placed downwards pressure on airfares, particularly on routes to popular
destinations such as Bali and Singapore. Other airlines responded by becoming less
labour-intensive, passing on cost savings to consumers by lowering airfares.
However, airfares increased over the three years through 2018-19. Many airlines,
mainly full-fare carriers, wound back capacity growth over this period, while
increasing demand pushed up prices.
Fuel is the largest industry cost. Although fuel prices increased over the three years
through 2018-19, industry profitability was supported by low prices relative to the
highs reported over the three years through 2013-14. In addition, the use of
increasingly fuel-efficient aircraft has reduced per-flight fuel consumption over the
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past five years, placing downward pressure on purchase costs. An increase in
airfares over the two years through 2018-19 also moderated purchase costs relative
to revenue. The price of fuel fell significantly in 2019-20, as demand from global
manufacturing and transport sectors plunged. Industry profit has fallen over the
past five years, and the industry is expected to report a heavy loss in the current
year. Falling activity and revenue are projected to result in a significant rise in fixed
costs, such as depreciation, during the COVID-19 pandemic.
Historical Performance Data
Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic
Demand
($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m)
2012–13 23,840 8,296 204 56 49,767 N/A N/A 5,302 N/A
2013–14 25,852 7,135 202 54 51,320 N/A N/A 5,823 N/A
2014–15 27,644 8,957 208 53 52,743 N/A N/A 6,052 N/A
2015–16 29,188 10,595 213 60 56,014 N/A N/A 6,813 N/A
2016–17 27,513 9,987 232 62 54,176 N/A N/A 6,651 N/A
2017–18 29,080 10,469 248 65 55,867 N/A N/A 7,021 N/A
2018–19 30,458 10,904 243 63 56,053 N/A N/A 7,063 N/A
2019–20 25,090 9,584 249 65 53,088 N/A N/A 6,132 N/A
2020–21 8,219 3,304 188 52 15,837 N/A N/A 2,320 N/A
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Industry Outlook
Outlook Once the COVID-19 pandemic is contained, the International
Airlines industry is forecast to benefit from increasing tourist
numbers.
The number of inbound tourists is
projected to recover over the long
term, driving significant revenue
growth for airlines. However,
lingering travel restrictions and the
global economic downturn are
anticipated to limit demand over the
five years through 2025-26,
particularly early in the period.
Industry revenue is forecast to rise at
an annualised 29.7% over the five
years through 2025-26, to $30.2
billion.
Recovery from COVID-19
The International Airlines industry is anticipated to gradually
recover from the effects of the COVID-19 pandemic over the next
five years.
However, restrictions on international travel will likely hinder the industry's short-
term outlook. The Federal Government has announced restrictions will continue
until at least 17 June 2021. Many border restrictions are expected to remain until
most of the adult population is vaccinated against COVID-19, which is scheduled to
be in October 2021. As of March 2021, Australia is behind schedule on its vaccine
rollout. Industry revenue is expected to strongly rise in 2021-22, but remain well
below totals reported prior to the COVID-19 pandemic. Nations with rapid vaccine
rollouts or similarly low case numbers to Australia, such as New Zealand, are
expected to be key markets for travel during this period. Although demand for
airfreight services is anticipated to remain strong, increasing capacity is expected
to result in prices trending towards levels exhibited prior to the COVID-19 pandemic
during 2021-22.
The industry's recovery from the COVID-19 pandemic will likely be strong. After
previous shocks, albeit more modest ones such as SARS, international air travel has
typically grown significantly. Individuals travelling to visit friends and family are
forecast to be the industry's primary market once borders reopen. In addition, fiscal
stimulus packages, both domestically and abroad, are expected to hasten the
economic recovery from the downturn during the COVID-19 pandemic.
Nevertheless, the negative economic effects of the pandemic will likely prolong the
industry's recovery period. Airlines are forecast to carefully expand capacity over
the next five years, in an attempt to boost profit and offset the severe losses
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reported during the COVID-19 pandemic. These strategies are projected to place
upward pressure on airfares, limiting industry demand over the period.
Demand for tourism
A recovery in tourism to Australia is forecast to drive industry
revenue growth over the next five years.
Australia will likely remain a reputable tourism destination, supporting a recovery in
traveller numbers. Advertising campaigns run by Tourism Australia, the government
body established to promote Australian tourism, are anticipated to further support
inbound tourism over the period. However, a moderate increase in the value of the
Australian dollar is projected to partially limit growth, as the relative cost of
travelling to Australia rises.
The number of Australians travelling overseas is also anticipated to rise over the
next five years, although at a slightly slower pace than growth in international
visitors to Australia. Over the short term, the adverse economic effects of the
COVID-19 pandemic are expected to encourage Australian residents to either
substitute international travel for domestic trips or fly to destinations close to
Australia, such as New Zealand. However, the strengthening Australia dollar is
forecast to support demand for outbound travel over the period.
International airline capacity is anticipated to increase to cope with higher demand
over the next five years. While most industry operators have indicated they will only
be increasing capacity in line with demand, passenger volume growth will result in
more flights to and from Australia. As a result, the scope and scale of airfreight
services to and from Australia are also anticipated to increase, as passenger
aircraft transport a substantial quantity of airfreight. Outbound airfreight volumes
will likely grow over the next five years, particularly due to increasing exports of
Australian produce.
Competition and costs
Several airlines are forecast to exit the industry as a result of the
COVID-19 pandemic.
A foreign airline ceasing flights to Australia would signal an industry exit. Strong
growth of inbound and outbound international trips is projected to entice new
airlines into the industry over the next five years, or draw back airlines that
temporarily ceased flights to Australia. Enterprise numbers are therefore forecast to
increase over the period. However, airlines are expected to carefully increase
capacity in an attempt to maximise airfares and boost profitability. A period of low
prices to reinvigorate demand is projected to be followed by an increase in airfares.
Strategies of deliberate capacity growth are forecast to limit industry competition
over the next five years.
Full-fare airlines have been working to differentiate their service offering from low-
cost carriers. Such measures include investing in new, efficient aircraft with more
legroom and improved in-flight amenities such as free Wi-Fi. Full-fare airlines are
projected to be more protected from price-based competition from low-cost carriers
over the next five years, as services continue to become less homogenous. Industry
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profit margins are projected to return to positive territory over the period. Demand is
anticipated to return to long-term levels after the COVID-19 pandemic is contained,
which will likely allow airlines to operate on a profitable scale. Steadily increasing
airfares are also projected to support industry profitability over the period.
Investment in new fuel-efficient aircraft will likely boost operating efficiencies for
major airlines. Despite the increasing use of fuel-efficient aircraft, industry fuel
expenses are projected to rise over the next five years, as the world price of crude
oil increases.
Industry players are anticipated to continue maximising employee efficiency to
reduce costs and protect profit margins over the next five years. As a result, wages
are projected to decline as a share of revenue over the period. However, both total
wages and employment are forecast to rise over the next five years, as airlines hire
more operational staff to manage increasing capacity.
Performance Outlook Data
Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic
Demand
($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m)
2021–22 14,659 5,732 207 56 28,825 N/A N/A 3,883 N/A
2022–23 23,413 8,874 229 60 46,977 N/A N/A 5,917 N/A
2023–24 26,383 9,814 238 63 51,230 N/A N/A 6,494 N/A
2024–25 28,615 10,788 250 65 54,348 N/A N/A 6,973 N/A
2025–26 30,212 11,994 256 67 56,303 N/A N/A 7,301 N/A
Industry Life Cycle The life cycle stage of this industry is Growth
LIFE CYCLE REASONS
Industry value added is growing slower than the overall economy, due to the COVID-19
pandemic
Consumers are becoming increasingly value conscious by booking with budget airline
carriers
Industry technological change is robust and ongoing

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The International Airlines industry is in the growth phase of its economic life cycle.
Industry value added, a measure of the industry's contribution to the overall
economy, is forecast to increase at an annualised 1.2% over the 10 years through
2025-26. This is slower than real GDP growth, which is expected to rise at an
annualised 2.1% over the same period. While this indicates that the industry is
underperforming compared with the overall economy, this is expected to be a
temporary trend, driven by the COVID-19 outbreak. As such, this IVA performance
cannot be used in isolation to determine the industry's life cycle phase.
The industry is highly competitive, with large international airlines competing to
attract and retain customers. The emergence of low-cost carriers, which primarily
compete on price, has increasingly drawn customers away from full-service airlines.
The rise of online travel companies, such as Expedia, has allowed consumers to
easily compare prices among airlines. These factors have all contributed to
consumers becoming more price savvy, increasing the number of budget carriers
operating in the industry. While these factors suggest the industry is in a mature
phase, the industry exhibits several signs of growth. Despite an increase in price-
based competition, most of the industry's major players were expanding leading
into the COVID-19 pandemic. Increasing global wealth has provided the industry
with a rapidly expanding market. In addition, industry technological change is rapid,
with most operators striving to incorporate emerging aviation technology.
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Products and Markets
Supply Chain KEY BUYING INDUSTRIES
1st Tier
Tourism in Australia
2nd Tier
Consumers in Australia
KEY SELLING INDUSTRIES
1st Tier
Petroleum Product Wholesaling in
Australia
Aircraft Manufacturing and Repair
Services in Australia
2nd Tier
Non-Scheduled Air Transport in Australia
Catering Services in Australia
Products and
Services


Services provided by the International Airlines industry can be
segmented into passenger and freight transport.
Passenger transport services, which include both full- and low-fare travel, are the
largest service segments. Industry operators also derive a small portion of revenue
from surcharges and extra fees, such as excess baggage fees. The COVID-19
pandemic has significantly disrupted all industry segments.
Freight transport
International airlines provide cargo transport services on both
freighter and passenger aircraft.
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This segment excludes air-based freight forwarding services. Continued growth in
international trade, driven by trends such as growth in online retailing, has boosted
air freight tonnage over the period. Strong demand growth has caused the price per
tonne to increase over the past five years.
Freight transport has risen as a share of revenue over the past five years. The
downturn in passenger aviation during the COVID-19 pandemic has resulted in
airfreight remaining as the industry's primary activity. This segment is expected to
significantly grow over the two years through 2020-21. Fewer aircraft movements
have resulted in the price of airfreight spiking. Furthermore, demand has been
supported by government subsidies and support packages, such as the
International Freight Assistance Mechanism. Such schemes have been introduced
to maintain a baseline supply of cargo space for perishable goods, particularly
agricultural produce.
Full-fare passenger transport
Despite the increasing popularity of low-cost carriers over the past
five years, traditional full-service carriers such as Qantas and
Singapore Airlines typically account for the largest share of industry
revenue.
Traditional airlines, with amenities such as spacious seating, complimentary hot
meals and in-flight entertainment, are generally more appealing to customers
travelling internationally. Their enduring appeal comes from the longer duration of
international flights, which makes comfort an important consideration for many
international flyers. Full-fare transport is particularly popular among business
travellers, who are often less price-conscious when travelling internationally.
Business travellers typically work within corporate budgets to fund international air
travel and are therefore more likely to travel with a full-fare airline than leisure
travellers.
This segment has decreased as a share of industry revenue over the past five years.
This decline is mostly attributable to conditions during the COVID-19 pandemic.
However, low-fare passenger transport was marginally outperforming this segment
in the years leading into the COVID-19 pandemic. This trend was due to faster
volume growth among budget carriers than full-fare airlines. Full-fare carriers have
been operating almost all flights for migration and repatriation purposes,
supporting this segment's estimated share of revenue in 2020-21.
Low-fare passenger transport
Low-fare airlines, which are run by both Australian and international
carriers, have become increasingly prevalent in the industry over
the past decade.
Cost-conscious consumers tend to be the biggest users of low-cost airlines. Most
industry entrants over the past five years have been low-cost airlines, such as Scoot
Tigerair and Batik Air. Other low-cost airlines have added international routes,
lowered their prices and extended their codesharing arrangements with other
airlines. However, this segment is expected to account for a negligible share of
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revenue in 2020-21, as budget carriers grounded their fleets during the COVID-19
pandemic.
Other services
The industry derives revenue from charges for excess baggage,
cancellation fees and booking change fees.
These services account for a small proportion of industry revenue, and generally
rise or fall in line with passenger numbers. This segment has therefore declined as
a share of revenue over the past five years.
Demand
Determinants
The main factors affecting demand for air travel include general
economic activity, the need for business travel, airfares, consumer
sentiment, exchange rates and discretionary incomes.
Demand from consumers and businesses is affected by prices. Increased capacity
places downward pressure on airfares and airfreight prices.
Leisure and business
Airfares determine non-business travel more than business travel,
as holidays or overseas visits can either be postponed or cancelled
when airfares are high.
A similar trend applies to exchange rate trends. When the Australian dollar is strong,
Australians are more likely to travel overseas as their trips become relatively
cheaper. Foreigners are more likely to travel to Australia if their currency
appreciates against the Australian dollar. For business travellers, airfares and
exchange rates are less important, as they are typically less able to defer travel.
Demand determinants for business travel include international trade activity,
corporate profitability and the availability of substitutes, such as video
conferencing. During periods of weak corporate profitability, business travel may be
restricted, or the class of travel may be downgraded as businesses seek to cut
costs.
Freight
Demand determinants of airfreight include the amount of high-value
or time-sensitive imports and exports, airfreight rates (which are
influenced by operating costs and capacity), and innovation in
shipping and packaging technology.
The capacity and frequency of scheduled international air transport is also an
important factor, because airfreight is often stowed on passenger aircraft. Goods
with high-value and time-sensitive products are more likely to be shipped using air
transport rather than other means, such as shipping by sea. Shipping products via
air is more profitable, especially if the goods have a high value-to-weight ratio.
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Major Markets
The International Airlines industry primarily provides air travel services in and out of
Australia. Visitors fly to and from Australia for various purposes, including holidays,
visiting friends and family, business, education and employment. The industry also
provides freight services.
Businesses
Businesses account for most demand for airfreight services. Businesses include
freight forwarders, courier companies, postal companies and companies that use
airfreight to transport goods. The geographic isolation of Australia means that
many businesses need to send time-sensitive, lightweight cargo by air. Over the
past five years, the growth of air passenger transport to and from Australia has
expanded freight capacity aboard passenger airlines. In addition, rising demand for
airfreight has caused freight tonnage prices to increase over the period. Price
growth has strongly accelerated during the COVID-19 pandemic, supporting airlines
providing airfreight services. This market has grown significantly as a share of
revenue over the past five years.
International travellers
Demand from international visitors travelling to Australia increased strongly over
most of the past five years, prior to the COVID-19 pandemic. The Australian dollar
has remained weak over the period, making it more affordable for international
tourists to visit Australia. Inbound visitor growth was strongest from China, the
United States, India and Japan over the three years through 2018-19. Australia's
proximity to Asia, and its numerous travel and sightseeing destinations have made
it a popular choice for many tourists. However, this market marginally declined as a
share of revenue over the three years through 2018-19. Robust airfreight price
growth resulted in the businesses market increasing at a greater rate. Demand from
this market is anticipated to be highly constrained over the two years through
2020-21. As a result, this market is expected to sharply decline as a share of
revenue over the five years through 2020-21.
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Australian residents
Australian residents travelling overseas were the industry's largest market before
the COVID-19 outbreak. Most Australians travel overseas for leisure purposes.
Therefore, this market is highly price-sensitive as these travellers often have flexible
travel dates and can defer trips if airfare prices are high. As a result, the value of the
Australian dollar significantly affects their decision to travel. Australians also travel
for business purposes. Although these travellers are fewer in number than leisure
travellers, resident departures for business purposes have increased at about the
same rate as leisure departures over the past five years. Business travellers are
typically less price sensitive than leisure travellers. Therefore, business travellers
are more likely to fly business class and generally pay more for tickets due to last
minute bookings.
This market has fallen as a share of revenue over the past five years. Passenger-
ticket revenue is expected to be limited in 2020-21 due to widespread restrictions
on international travel. In addition, far fewer Australian residents have been
returning home compared with international residents returning to their nation of
origin during the COVID-19 pandemic. Departures more than doubled arrivals over
the first half of 2020-21. This trend is partly attributable to Australia's strict border
closure standards, which has created difficulty for residents in arranging travel
home. Prior to the COVID-19 pandemic, this market was marginally declining as a
share of revenue, as a weak Australian dollar discouraged overseas trips.
International
Trade
Exports in this industry are Low and Steady
Imports in this industry are Low and Steady
Limited international trade takes place in the industry as it is primarily service-
based. However, the industry is subject to inbound and outbound tourism trends.
The industry is significantly exposed to overseas markets including international
exchange rates, and household incomes in Australia and overseas.
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Business
Locations

Business Concentration in Australia
ACT
NSW
NT
QLD
SA
TAS
VIC
WA
0 19 38 57
Percentage of Passenger volumes (%)
International Airlines in Australia
Source: IBISWorld

In 2020-21, each state's share of passenger numbers is expected to be significantly
altered. The COVID-19 pandemic has resulted in most passenger movements being
for migration purposes. Current year passenger shares also reflect each state's
attitude towards hotel quarantine programs. However, some inbound passengers
are expected to have not been captured by the Bureau of Infrastructure and
Transport Research Economics' data. The Federal Government has operated some
repatriation flights, with aircraft being wet leased from Qantas. Government
activities are likely to be classified.
The number of passengers landing in each state represent industry business
locations. Few international airlines have an Australian registered company, so
business location data is not applicable to the industry. Therefore, this chapter
largely reflects activity at Australian international airports. A significant proportion
of passengers depart from or land in New South Wales, with the state over-
represented relative to its population. This is because Sydney's Kingsford Smith
airport is a major arrival and departure hub for passengers flying internationally.
Due to capacity issues at Kingsford Smith airport, the Federal Government is
planning to build a second airport in Badgerys Creek, Sydney. As at April 2021, the
airport is due to open in 2026 and have an estimated capacity of 10 million
passengers in its first year.
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Melbourne's Tullamarine Airport is the second busiest airport in Australia. As a
result, Victoria has a substantial share of industry activity, which is typically in line
with its share of Australia's population. This is also partly due to Melbourne having
one of the most competitive landing fee structures in Australia. International
passenger volumes from Melbourne Airport have increased over the past five years,
as new industry participants have chosen Melbourne as their Australian hub.
Melbourne Airport has become more popular as a hub location for many airlines
due to overcapacity constraints at Sydney airport.
Queensland also accounts for a large share of industry activity. Brisbane is
estimated to account for about 15% of industry passengers in a typical year, with
Brisbane Airport catering to most incoming flights from the Pacific Islands. Other
Queensland airports with significant international scheduled air transport include
Gold Coast Airport and Cairns Airport. Queensland has many well-known natural
attractions, such as the Great Barrier Reef, which make it a popular destination for
foreign tourists.


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Competitive Landscape
Market Share
Concentration
Concentration in this industry is Medium
The International Airlines industry is
moderately concentrated. The four largest
airlines typically account for just under
55% of industry revenue. Qantas is the
largest player, due to its established
history in Australia, its fleet size and its
extensive network of international
destinations. Emirates and Singapore
Airlines are the two largest foreign entities
operating in the industry, benefiting from
their strong global brand presence. Virgin
Australia is Qantas' main competitor both
domestically and internationally. The
industry's other players are mostly
international airlines that run a few
scheduled services to a range of
international destinations. There are also several smaller players that only operate
in certain regions of Australia and use smaller aircraft to fly to nearby destinations,
such as the Pacific Islands.
The industry's market share concentration is expected to fall but remain moderate
in 2020-21. Each airlines' market share is projected to shift significantly during the
current year. Airfreight services have surged as a share of revenue, meaning
company market share largely reflects each airlines participation in cargo-related
activities. For instance, FedEx typically accounts for a negligible share of industry
revenue but is anticipated to be the fifth largest player in 2020-21.
Key Success
Factors
IBISWorld identifies 250 Key Success Factors for a business. The most important for this
industry are:
Ability to effectively manage risk: Operators with a successful fuel hedging strategy can
better control their most volatile purchase cost. This allows them to better manage their
financial position.
Optimum capacity utilisation: Operators that match aircraft capacity with routes can
better control costs and increase margins.
Ability to expand and curtail operations rapidly in line with market demand:
Operators that have flexible aircraft fleet capacity to meet peaks and troughs in demand can
improve revenue growth and profitability.
Access to the latest available and most efficient technology and techniques:
Operators that use the latest aircraft, which tend to be faster and more fuel-efficient than
older models, can save on operating costs.
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Cost Structure
Benchmarks
Profit
Several factors influence profitability,
particularly changes in fuel prices, fluctuations
in the Australian dollar and price competition
among international airlines. Profit margins are
low due to the industry's highly competitive
nature, low differentiation among operators and
limited economies of scale. The industry has
high fixed costs, including leasing or purchasing
aircraft, insurance costs, renting terminals and
facilities, and other ancillary expenses. The
marginal cost of taking an extra passenger on
board is negligible, which means that airlines
aim to maximise the number of passengers per
flight to boost profitability.
Steady growth in the price of aviation fuel over
the three years through 2018-19 resulted in
profit margins falling over that period. Several
low-cost carriers entered the industry, which
also suppressed profitability as many of these
airlines did not have a highly profitable scale.
Industry profit decreased strongly in 2019-20,
but easing price-based competition prior to the
COVID-19 outbreak offered some relief to
airlines.
The COVID-19 pandemic has forced airlines to
cut almost all passenger flights, significantly
boosting fixed costs as a share of revenue. For
instance, depreciation has sharply increased
over the two years through 2020-21. Industry
profitability is anticipated to be negative in
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2020-21, as airlines report significant losses. In
addition to standard fixed costs, many airlines
have taken the opportunity to restructure their
fleets. Instances of asset writedowns are
anticipated make reported losses more severe
in the current year. However, airlines have
moderated losses by rapidly reducing some
variable costs.
Wages
Wages are a major expense item for industry
firms as staff must maintain, load and operate
aircraft, and handle passengers. A crew usually
consists of a pilot, co-pilot, flight engineer
(depending on the type and age of the aircraft)
and flight attendants, with the Federal
Government and international air associations
mandating the number of staff required per
flight. Other major labour requirements include
staff that operate check-in facilities and
corporate staff.
Wages have increased as a proportion of
revenue over the past five years. Over the long
term, price competition has caused many
operators to reduce labour costs to protect
profit margins. Operators have further lowered
their wage costs by introducing electronic ticket
distribution systems and automated check-in
facilities. However, a pilot shortage has boosted
the industry's average wage over the period.
Wages are anticipated to increase as a share of
revenue over the two years through 2020-21.
Most airlines are expected to maintain some
core staff over the temporary demand slump
during the COVID-19 pandemic. However,
operators have aggressively reduced operational
staff numbers and placed employees on leave,
limiting overall wage costs over the past two
years.
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Purchases
Purchases make up the largest cost segment
for industry operators. Purchases include fuel,
route navigation and landing fees, in-flight
passenger expenses (such as meals) and
ground handling charges. Landing fees tend to
vary between airports, and this cost significantly
affects whether airline operators establish local
hubs in Australia.
Fuel is the largest purchase cost due to its
essential nature in aircraft operation and the
large quantities required to fly from Australia to
international destinations. Most airlines hedge
against changes in fuel prices, locking in a
certain fuel price by entering financial contracts
with fuel wholesalers. Hedging limits airlines'
exposure to large changes in the world price of
crude oil. Fuel prices rose over the three years
through 2018-19 but remained lower than in
2014-15, supporting industry margins.
Furthermore, fuel costs fell sharply in 2019-20,
as the COVID-19 pandemic reduced demand
from manufacturers around the world. Although
airlines have largely been unable to benefit from
lower fuel prices, purchases have fallen as a
share of revenue over the past five years.
Depreciation
As most companies own their aircraft,
depreciation costs represent a large portion of
industry revenue. Depreciation costs include
depreciation on aircraft, aircraft parts,
communication equipment, loading and
unloading equipment, and office equipment.
Depreciation has increased as a share of
industry revenue over the past five years, as
companies have increasingly purchased new
planes to replace older and less fuel-efficient
aircraft. Furthermore, depreciation costs are
mostly fixed, resulting in a spike in revenue
share terms during the COVID-19 pandemic.
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Other Costs
Other costs include operating leases, utilities,
administration costs, rent, hedging costs,
insurance premiums, sales and legal expenses,
and advertising costs. Advertising is a major
strategy for attracting customers among major
airlines. While advertising does not account for
a large share of revenue, it is an important
ongoing cost for large international airlines and
has remained stable over the past five years.
Large commercial airlines typically own most of
their aircraft fleet, although many operators
lease a portion of their fleets to meet demand
fluctuations and reduce depreciation costs.
However, most of these lease agreements give
the lessee the option to purchase at the end of
the lease, enabling the lessee to depreciate the
aircraft. Aircraft leasing costs have remained
stable as a share of revenue over the past five
years. Purchases of new aircraft have reduced
maintenance costs as a share of revenue over
the past five years, as new and upgraded planes
require less maintenance.
Basis of
Competition
Competition in this industry is High and Increasing
The International Airlines industry is highly competitive.
International airlines tend to compete on price and quality. Over the past decade,
low-cost airlines, such as Jetstar and Scoot Tigerair, have rapidly expanded, which
has heightened price-based competition in the industry. External competition is
limited, as no other overseas transport alternatives achieve the same speed and
efficiency as international air travel.
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Internal competition
Two main factors that international airlines compete on are price
and quality of service, which are typically linked.
Customers who pay more for airfares tend to receive higher quality service. Quality
relates to the services included in the airfare, such as meals, seat size, luggage
allowances and in-flight entertainment. Low-cost carriers tend to charge additional
fees for these items. This reduces the airfare for passengers and allows them to
pick additional services if they desire. Operators that offer cheap fares and fewer
services have proven increasingly popular among the Australian public, which has
been reflected in their expanding market share over the past decade, prior to the
COVID-19 pandemic.
Despite the increasing popularity of low-cost carriers, certain groups of customers
still prefer to pay more for better quality service. These customers tend to be
business travellers and other less price-sensitive consumers. Factors that also
contribute to the competitiveness of companies focusing on non-price sensitive
customers include service frequency, the availability of airport lounges, route
coverage and rewards programs. For this reason, the largest airlines usually have
the highest competitive advantage for business travellers as they have the largest
route coverage and offer a variety of supplementary services.
The number of carriers partly determines the competitiveness of the industry,
despite the differences between operators. For example, fewer carriers results in
more routes covered by each, increased flight frequency for each carrier, and more
market power. The number of participants in the International Airlines industry had
grown over the decade prior to the COVID-19 pandemic. Over the same period,
China's three largest airlines, Air China, China Eastern and China Southern,
increased their capacity in the Australian market in response to rising demand from
Chinese travellers to visit Australia. These companies offer cheap flights to and
from Asia, and have increased price competition in the industry over the past five
years.
External competition
International air transport to and from Australia is subject to little
external competition.
Due to the geographic isolation of Australia, passengers tend to use air travel due to
its speed and efficiency. While other methods of transport, such as cruise ships,
can also cover the geographic distance from Australia to overseas countries, none
come close to the speed achieved by air travel.
Barriers to Entry Barriers to entry in this industry are High and Steady
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The International Airlines industry has
high barriers to entry, and this
characteristic has remained unchanged
over the past five years. The industry's
high barriers to entry are due to the large
costs associated with leasing or
purchasing aircraft, specialist
machinery, hangars and other airfield
space, and employing skilled labour,
such as pilots, flight crew and aircraft
mechanics. Satisfying stringent safety
requirements also presents a
substantial barrier, as airlines can be barred from operating international routes in
and out of Australia if they do not meet these requirements. The Federal
Government also imposes a 49.0% foreign ownership cap on Australian airlines to
ensure they remain Australia-based and receive the full benefits of bilateral
agreements. This factor restricts the entry of new Australia-based players, as it
limits the foreign capital available to new Australia-based entrants.
The presence of existing players is also a large barrier to entry. For example, airline
agreements involving landing rights can determine the number of aircraft
designated to operate on each route, and therefore act as a barrier for non-
designated airlines. These agreements also set capacity limits for each country and
impose a volume quota on international airline services on a country-by-country
basis. Airlines tend to use these quotas as an incentive to maximise benefits by
aiming for the higher end of the market, reducing the number of discount and
economy airfares offered, and therefore offering less variety in fares and services
than would occur in a more competitive environment.
A major barrier to entry in Australia is insufficient airport capacity, particularly in
runways, terminals and apron parking for aircraft. This factor is particularly relevant
for Sydney Kingsford Smith Airport, the largest and busiest airport for travellers
arriving in and departing from Australia. The increased number of domestic jet
flights and smaller aircraft using the two runways, combined with the nightly curfew
operating at Sydney Kingsford Smith Airport, add to the congestion faced by
international flights. To combat airport congestion, airport operators have
increasingly altered airport fees and landing structures for international airlines,
adding additional surcharges that include re-fuelling costs and other costs relating
to docking and fleet preparation. These costs vary between airports and can create
a significant difference in entry barriers between regions.
Barriers to entry checklist
Competition High
Concentration Medium
Life Cycle Stage Growth
Technology Change High
Regulation & Policy Heavy
Industry Assistance Low
Industry
Globalization
Globalization in this industry High and Increasing
The International Airlines industry in Australia exhibits a high level of globalisation.
The level of globalisation has increased over the past five years, due to the
increased number of foreign-owned airlines flying to and from Australia. For
example, Hong Kong Airlines commenced operations in Australia in 2016, while
Batik Air, subsidiary of Indonesian low-cost carrier Lion Air, entered the Australian
market in 2018.
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Globalisation has also increased due to international airlines increasingly entering
codesharing agreements. Codesharing is a marketing arrangement that allows one
airline to sell tickets to and place its code on another airline's flight. These
arrangements are designed to enhance an airline's exposure to flight routes that
they would otherwise not have access to. Many international airlines are members
of partnerships such as SkyTeam, Star Alliance and Oneworld, which are designed
to facilitate codesharing agreements.
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Major Companies


Major Players QANTAS AIRWAYS LIMITED
Market Share: 17.1%
Qantas Airways Limited is an Australian public
company that generates most of its revenue
from air transport services. Qantas is the
national carrier of Australia and has an
extensive domestic and international route
network. It also offers services across a
network covered by codeshare partners in
Australia, Asia, North America, South America,
Europe and Africa. Qantas was founded in
1920 in Queensland under the name
Queensland and Northern Territory Aerial
Services Limited (QANTAS). The company operates in the industry through its
flagship Qantas airline and its low-fare carrier Jetstar.
Qantas operates an extensive international flight network. The airline's most
popular international destinations (by number of flights per year) include New
Zealand, Bali and the United States. To expand and enhance the efficiency of its
international operations, Qantas has partnerships with foreign-based airlines,
including the US-based American Airlines and the Dubai-based Emirates Group.
Qantas's alliance with American Airlines also helps coordinate pricing, scheduling,
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procurement and lounge access between the two airlines, and increases seat
utilisation on the company's trans-Pacific flights. Qantas also began a similar
arrangement with Air New Zealand in October 2018 for trans-Tasman flights. Over
the past decade, Qantas has promoted its budget subsidiary carrier Jetstar in
response to strong competition from foreign international airlines.
Qantas has focused on renewing its international aircraft fleet over the past five
years. The company currently operates Airbus A380s, Airbus A330s, Boeing 787-9
Dreamliners and other aircraft. These aircraft, particularly the 787-9, have greater
fuel efficiency and longer ranges than the company's older aircraft. While the 787-9
aircraft has lower seat capacity than the 747s, their greater fuel efficiency is
anticipated to reduce the company's fuel costs and enhance passenger comfort. In
August 2016, Qantas ordered a $23.0 million flight simulator for the 787-9 at its
Sydney base to train pilots for the new aircraft fleet's launch.
The company received its first Boeing 787-9s in October 2017. The Dreamliners
allow Qantas to offer non-stop flights on routes such as Melbourne-Los Angeles
and Perth-London, the latter of which will replace the Melbourne-London route that
was serviced by its Airbus A380 fleet. This change will allow Qantas to redirect its
A380 fleet towards in-demand Asian routes, which will likely boost the firm's
passenger load factor on international routes. As of March 2020, Qantas had 11
active 787-9s, and this number was expected to grow to 14. However, the airline has
delayed some forward orders of aircraft in response to the COVID-19 pandemic.
The company's most common aircraft remains the Boeing 737-800, with 62 on
active service and 13 parked due to the lack of air travel during the COVID-19
pandemic.
Financial performance
Qantas Airways Limited's industry-specific revenue is expected to decrease at an
annualised 28.5% over the five years through 2020-21, to $1.4 billion. This
represents an underperformance of the industry over the same period. Qantas's
market share is anticipated to fall sharply during the current year. The airline was
among the first to implement capacity cuts in response to the COVID-19 pandemic.
Qantas's capacity has remained lower than competing airlines during the pandemic,
despite offering some repatriation flights. Limited passenger flights have also
constrained the company's freight revenue. However, Qantas's market share
marginally increased over the three years through 2018-19. Optimisation of routes
and a settled strategic direction aided this growth. In particular, Qantas's revenue
grew significantly in 2017-18, due to increased passenger volumes on routes to and
from China and airfare price growth.
Prior to the COVID-19 pandemic, capacity realignment, partnerships with other
airlines and cost-cutting initiatives, such as large-scale job redundancies and a
freeze on wages, restored Qantas's international operations back to profitability
since 2013-14. Savings realised from the Dreamliners, which have lower operational
costs, and ongoing cost-cutting initiatives strongly improved Qantas's profitability
over the three years through 2018-19. However, company profit is anticipated to
strongly decline over the two years through 2020-21. Qantas reported an industry-
specific profit margin loss of 40.6% over the first half of 2020-21.
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Qantas Airways Limited - industry segment performance*
Year Revenue Growth
($m) (% change)
2010-11 7021.9 N/C
2011-12 7212.9 2.7
2012-13 7120.7 -1.3
2013-14 6882.8 -3.3
2014-15 7192.7 4.5
2015-16 7510.5 4.4
2016-17 7337.8 -2.3
2017-18 8072.3 10.0
2018-19 8605.5 6.6
2019-20 6879.6 -20.1
2020-21 1407.9 -79.5
Source: IBISWorld
Note: *Estimate
SINGAPORE AIRLINES LTD
Market Share: 11.1%
Singapore Airlines Ltd is the national airline of
Singapore and uses Singapore's Changi
Airport as its hub. The airline is prominent in
South-East Asia and is a major player in
Europe-Oceania routes. The airline began in
1947 as Malayan Airways Limited, flying from
Singapore to Kuala Lumpur. After several
name changes, Malaysia-Singapore Airlines
(as it was then known) ceased operating in
1972 following political disagreements
between Singapore and Malaysia. This led to
the creation of two separate entities: Singapore Airlines and Malaysian Airline
System Berhad (now Malaysia Airlines Berhad).
Singapore Airlines is known for its extended service and the convenient centralised
location of its home base in Changi Airport. The airport's location has made it a
major hub for international travel, which has greatly benefited the firm. Singapore
Airlines has continued to differentiate itself by introducing the Singapore Airlines
Suites, an exclusive class available on its A380 flights.
Singapore Airlines has expanded its presence in the Australian market over the past
decade. In 2012, the company launched its low-cost international carrier, Scoot,
which primarily flies from Singapore to China and Australia. Tigerair was integrated
under the Scoot brand name in July 2017, becoming Scoot Tigerair. Singapore
Airlines further expanded its Australian footprint in September 2016, when it began
selling airfares for trans-Tasman routes. The airline had operated trans-Tasman
flights for several years prior, but solely for airfreight services. Singapore Airlines
also has a long-term alliance with Virgin Australia, which involves a codesharing
arrangement and reciprocal frequent flyer benefits and lounge access. In June
2016, Singapore Airlines reported a decline to its shareholding in Virgin Australia, to
20.1%. Singapore Airlines' shareholding was diminished after Virgin issued new
shares to allow Chinese company HNA Group a 13.0% stake in the Australian
carrier. Singapore Airlines ceased to be a shareholder of Virgin Australia in
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November 2020. The Australian airline was purchased by Bain Capital and delisted
from the ASX.
Financial performance
Although Singapore Airlines does not have a corporate entity in Australia, its market
share is estimated based on its seat capacity and freight tonnage to and from
Australia. Singapore Airlines' industry-specific revenue is expected to fall at an
annualised 19.4% over the five years through 2020-21, to $909.3 million. The
company has outperformed the wider industry over the period. This is largely due to
strong revenue growth in 2017-18, when the company opened trans-Tasman flights,
expanding from its traditional routes which was primarily to and from Changi
Airport. The airline's core routes also reported strong growth over the year.
Company revenue was further boosted by its subsidiary, Scoot Tigerair, beginning
flights to and from Australia in 2017-18. However, similarly to the wider industry,
Singapore Airlines' revenue is anticipated to plummet over the two years through
2020-21, due to the COVID-19 pandemic. The company has reported strong profit
margins over the past five years, due to its premium high-margin services.
Singapore Airlines Ltd - industry segment performance*
Year Revenue Growth
($m) (% change)
2010-11 2017.6 N/C
2011-12 2106.6 4.4
2012-13 2386.7 13.3
2013-14 2443.2 2.4
2014-15 2600.0 6.4
2015-16 2669.5 2.7
2016-17 2532.7 -5.1
2017-18 3120.2 23.2
2018-19 3421.2 9.6
2019-20 2914.4 -14.8
2020-21 909.3 -68.8
Source: IBISWorld
Note: *Estimate
EMIRATES GROUP
Market Share: 9.1%
Emirates, the main subsidiary of the Emirates
Group, is a Dubai-based international aviation
holding company. The airline was launched in
1985 and is the international carrier of the
United Arab Emirates and the largest airline in
the Middle East. Emirates is privately owned
and the royal family of Dubai is its major
shareholder. The airline also operates in the
industry through its Emirates SkyCargo brand,
which provides international freight services.
Since its first flight to Australia in 1996, Emirates has made significant inroads in
the Australian market through its aviation operations and developments in luxury
tourism. The airline does not compete directly on price in the international market,
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but instead focuses on product differentiation. The airline's passengers can fly to
most major European cities with only one stop, rather than stopping in Asia and
transiting through London Heathrow Airport.
Emirates began an extensive partnership with Qantas in 2013, with Qantas
relocating its European hub to Dubai. The two companies now reciprocate frequent
flyer rewards and Emirates provides access to many European cities for Qantas
customers. While this partnership was extended in August 2017, the new
arrangement resulted in Qantas moving its European hub back to Singapore.
Emirates now services flights to the Middle East, while Qantas launches most of its
flights to Europe from airports in Singapore and Perth.
Financial performance
Although Emirates Group does not have a corporate entity in Australia, its market
share is estimated based on its seat capacity and freight tonnage to and from
Australia. Emirates Group's industry-specific revenue is expected to decrease at an
annualised 22.6% over the five years through 2020-1, to $747.7 million. This
represents an underperformance of the industry over the same period.
The company has reported that revenue has fallen over the past five years.
Previously, Emirates had benefited from travellers using the airline to get to and
from Europe, particularly for high-margin business class seats. However, strong
industry competition reduced airfares in 2016-17, which negatively affected the
company's performance. In addition, Qantas began offering more convenient flights
to European locations in 2017-18, which reduced Emirates' passenger volumes in
the same year. The new arrangement with Qantas signed in August 2017 reduced
Emirates' revenue in 2017-18, while the wider industry grew strongly. However,
Emirates is expected to report growth in its market share in 2020-21, due to a
strong increase in airfreight revenue. Australian produce exporters have continued
to target Saudi Arabia, relying on the airline to move stock. Airfreight prices to the
Middle East have risen significantly during the COVID-19 pandemic. Nevertheless,
Emirates' industry-specific profitability has fallen over the past five years.
Emirates Group - industry segment performance*
Year Revenue Growth
($m) (% change)
2010-11 1740.6 N/C
2011-12 1873.8 7.7
2012-13 2155.1 15.0
2013-14 2470.9 14.7
2014-15 2717.3 10.0
2015-16 2694.8 -0.8
2016-17 2428.7 -9.9
2017-18 2400.5 -1.2
2018-19 2394.8 -0.2
2019-20 1873.5 -21.8
2020-21 747.7 -60.1
Source: IBISWorld
Note: *Estimate
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QATAR AIRWAYS GROUP Q.C.S.C.
Market Share: 8.9%
Qatar Airways Group is the state-owned flag
carrier of Qatar. The company was established
in 1993, and has grown rapidly to become one
of the world's best-known airlines. Qatar
Airways benefits from its primary hub being
based in Hamad International Airport, Doha.
Similar to Emirates, the airport hosts many
flights connecting Oceania and Asia to
Europe. In particular, the airline has leveraged
its location to increase its market share in
Australia over the past decade. Qatar Airways
has steadily expanded its capacity to and from Australia, and this strategy was
strengthened by Qantas's shift to launching European connection flights from
Singapore. Less direct competition from Australia's flag carrier has allowed Qatar
Airways greater visibility in the market. The airline has largely positioned itself as an
upper-mid-market brand. The airline also participates in the industry through its
freight division, Qatar Airways Cargo.
Financial performance
Although Qatar Airways Group does not have a corporate entity in Australia, its
market share is estimated based on its seat capacity and freight tonnage to and
from Australia. Qatar Airways' industry-specific revenue is expected to increase at
an annualised 11.4% over the five years through 2020-21, to $728.1 million. This
represents a strong outperformance of the industry over the same period. This
outperformance reflects the company's aggressive capacity expansion to and from
Australia over the past decade. In addition, Qatar Airways' market share is
anticipated to surge in 2020-21. The airline has continued to operate solid volumes
of passenger flights, relative to the wider industry, during the COVID-19 pandemic.
Over the first half of 2020-21, Qatar Airways carried 21.8% of industry passengers,
most of which were departures. The airline has also benefited from highly elevated
airfreight prices to the Middle East. The company's industry-specific profitability is
expected to have increased over the past five years.
Qatar Airways Group Q.C.S.C.- industry segment performance*
Year Revenue Growth
($m) (% change)
2010-11 117.9 N/C
2011-12 130.4 10.6
2012-13 228.0 74.8
2013-14 289.1 26.8
2014-15 343.7 18.9
2015-16 424.0 23.4
2016-17 619.8 46.2
2017-18 779.9 25.8
2018-19 965.5 23.8
2019-20 944.7 -2.2
2020-21 728.1 -22.9
Source: IBISWorld
Note: *Estimate
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FEDEX EXPRESS AUSTRALIA PTY
LTD
Market Share: 8.8%
FedEx Express Australia Pty Ltd is a foreign-
owned private company that primarily
operates as an express road freight operator.
The company's primary activity until February
2018 was airfreight operations, via the entity
Federal Express (Australia) Pty Limited. In
May 2016, the United States-based FedEx
Corporation acquired TNT Express BV and its
subsidiaries. This restructure took nearly two
years to be reflected in Australia. In February 2018, FedEx Express Australia Pty Ltd
was established, becoming the parent entity of Federal Express (Australia) Pty Ltd
and TNT Australia Pty Ltd. The new entity has been steadily integrating FedEx's and
TNT's operations over the past three years.
FedEx Express Australia Pty Ltd has been nominated as the entity participating in
the industry. However, as the industry includes internationally owned airlines, the
broader network of aircraft ultimately operated by the United States-based FedEx
Corporation (sometimes designated as Federal Express Corporation) are included
in the industry. FedEx operates the largest network of cargo aircraft globally,
totalling 458 as of March 2021.
Financial performance
FedEx's total network market share is estimated based on its freight tonnage to and
from Australia. The network does not operate passenger flights. FedEx's industry-
specific revenue is forecast to increase at an annualised 51.5% over the five years
through 2020-21, to $721.6 million. This represents a significant outperformance of
the industry over the same period. FedEx's market share is anticipated to spike in
2020-21, as the network benefits from its dedicated airfreight activities. FedEx's
tonnage increased by 55.8% in 2019-20 and is anticipated to increase by 60.1% in
2020-21. FedEx is one of ten companies, and the only dedicated cargo carrier,
participating in the International Freight Assistance Mechanism in Australia. A
surge in airfreight prices during the COVID-19 pandemic is expected to result in
FedEx's industry-specific profitability rising over the five years through 2020-21.
FedEx Express Australia Pty Ltd - industry segment performance*
Year Revenue Growth
($m) (% change)
2010-11 52.0 N/C
2011-12 49.7 -4.4
2012-13 40.9 -17.7
2013-14 35.8 -12.5
2014-15 42.3 18.2
2015-16 90.3 113.5
2016-17 94.0 4.1
2017-18 107.8 14.7
2018-19 153.7 42.6
2019-20 318.8 107.4
2020-21 721.6 126.3
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Source: IBISWorld
Note: *Estimate
CATHAY PACIFIC AIRWAYS LIMITED
Market Share: 6.6%
Cathay Pacific Airways Limited is the flag
carrier for Hong Kong, with its hub based at
Hong Kong International Airport. The airline
was founded in 1946, operating as a freight
carrier between Sydney, Australia and
Shanghai, China. Cathay Pacific is a major
operator across Asia, and it is listed on the
Hong Kong Stock Exchange. As of March
2020, the airline's global fleet totalled 167
aircraft, 104 of which have been parked during
the COVID-19 pandemic. The company
participates in the industry via flights to and from most major international airports
in Australia, including Melbourne, Sydney, Brisbane, Perth and Adelaide. Cathay
Pacific has significant freight operations due to its base in Hong Kong airport, the
busiest cargo centre in the world.
Financial performance
Although Cathay Pacific Airways does not have a corporate entity in Australia, its
market share is estimated based on its seat capacity and freight tonnage to and
from Australia. Cathay Pacific's industry-specific revenue is expected to decrease at
an annualised 18.1% over the five years through 2020-21, to $540.2 million. This
represents an outperformance of the industry over the same period. This
outperformance is largely due to the company's strong revenue growth from
airfreight operations in 2020-21, despite a decrease in passenger revenue. Prior to
the COVID-19 pandemic, the airline was losing market share as Hong Kong
represented a diminishing share of the tourism market. The Hong Kong protests in
2019-20 contributed to Cathay Pacific losing market share during the same year.
The company's industry-specific profitability is expected to have decreased over the
past five years.
Cathay Pacific Airways Limited - industry segment performance*
Year Revenue Growth
($m) (% change)
2010-11 1172.0 N/C
2011-12 1198.2 2.2
2012-13 1139.4 -4.9
2013-14 1265.9 11.1
2014-15 1428.4 12.8
2015-16 1469.5 2.9
2016-17 1337.1 -9.0
2017-18 1388.4 3.8
2018-19 1509.3 8.7
2019-20 1230.7 -18.5
2020-21 540.2 -56.1
Source: IBISWorld
Note: *Estimate
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Other Players The industry includes many global carriers that have international hubs in Australia.The number of smaller, low-cost players operating in the industry has risen due to
increasing inbound tourism over the past five years, particularly from Asia. This
trend has prompted airlines such as China Southern, Air China and other Asia-based
carriers to continue expanding into the Australian aviation market. The industry's
other notable companies by passenger numbers and revenue are Virgin Australia
and AirAsia.
VIRGIN AUSTRALIA HOLDINGS LIMITED
This company is expected to have minimal industry market share in the current
year. Virgin Australia Holdings Limited is an Australian public company that
provides domestic and international passenger air travel. Virgin Australia started
operations in Australia in 2000 as Virgin Blue, offering low-cost domestic air travel
between capital cities. The company had support from federal, state and local
governments, which provided incentives for it to service routes that would
otherwise be subject to a high-price monopoly. In May 2011, the firm rebranded to
Virgin Australia.
Virgin Australia began operating in the International Airlines industry in February
2009 with the departure of its first international flight from Sydney to Los Angeles.
The firm offered flights to Asia, Europe, the Middle East, North America and South
Africa. Virgin Australia also offered several flights to New Zealand. This included
the company's monopoly over the Newcastle-Auckland route, which began
operation in November 2018. Notably, this was the only commercial international
flight operating from Newcastle airport. However, the company ended its codeshare
arrangement with Air New Zealand in October 2018, which negatively affected
demand for trans-Tasman flights.
Virgin Australia formerly operated in the industry through its subsidiary low-cost
airline Tiger Airways Australia. In the first quarter of 2013, Virgin acquired a 60.0%
stake in Tiger Airways Australia on regulatory approval from the ACCC and acquired
the remaining 40.0% in October 2014. However, in February 2017, Tigerair
discontinued flights to Bali, its only international route, after failing to secure
regulatory approval from Indonesian bodies.
Virgin Australia ceased flying international routes on 30 March 2020, due to the
COVID-19 pandemic. On 21 April, the airline entered voluntary administration. In
November 2020, Virgin Australia was delisted from the ASX after being purchased
by private equity firm Bain Capital. The airline had recorded statutory losses over
most of the past decade, leaving the company in a precarious position prior to the
COVID-19 pandemic. Virgin Australia has temporarily ceased flying internationally,
signalling an exit from the industry. However, the company has stated it intends to
restart international flights after the COVID-19 pandemic is contained.
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Operating Conditions


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Capital Intensity The level of capital intensity is High
The International Airlines industry is highly
capital-intensive. For every dollar spent as
wages, an estimated $1.54 is invested in
capital. The industry's high capital intensity is
due to the large capital investment required to
operate an airline. Commercial aircraft can be
leased to ease capital requirements, although
most airlines, particularly larger international
carriers, generally own their aircraft. Major
airlines' substantial capital and the need to
control costs make it economical to purchase
aircraft outright from manufacturers, such as
Boeing or Airbus.
Firms have increasingly incorporated more
efficient communications equipment, newer
aircraft, computer-assisted booking, strong
and flexible packing equipment, and route
planning facilities, reducing the need for non-
flying and maintenance labour over the past
five years. Despite this trend, certain labour
functions, such as piloting and customer
service, require specialised knowledge. As a
result, wages remain a significant cost for
industry operators. Furthermore, rising flight volumes required industry operators to
employ more flight staff prior to the COVID-19 pandemic. Certain types of trips,
such as long-haul flights, and particular aircraft types require extra crew members
to adhere to Federal Government safety requirements. However, industry
employment is anticipated to fall significantly over the two years through 2020-21,
as the industry heavily reduces capacity in response to the COVID-19 outbreak.
Technology And
Systems
Potential Disruptive Innovation: Factors Driving Threat of Change
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 MarketConcentration Unlikely
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.
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.
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Level Factor Disruption Description
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.
Very Low Rate of Entry Very 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.
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.
Major market segments for industry operators are relatively diversified. The spread
of market segments suggests that there are limited entry points other than those
already served my incumbent operators.
The International Airlines industry exhibits high technological
change.
However, few disruptive technologies have affected the industry over the past five
years. Technological advances mostly relate to improving existing capital,
particularly aircraft. Consequently, most technology advancements are accounted
for in the upstream Aircraft Manufacturing and Repair Services industry. The
presence of large global aircraft manufacturers, Boeing and Airbus, results in
innovation occurring outside Australia. Nevertheless, new aircraft developments
have significantly affected the industry. The Boeing 787-9 Dreamliner is more fuel-
efficient than contemporary aircraft, which has reduced industry costs and opened
up new long-haul flight paths for industry airlines. For example, Qantas's direct flight
from Perth to London was made possible by the Dreamliner's efficient operation
and improved comfort, mostly in the form of increased legroom. The Dreamliner is
built with lightweight composite material that has made these longer flights
possible.
Further advancements in aircraft technology are projected to affect the industry
over the next five years. As part of its Project Sunrise, Qantas has challenged
aircraft manufacturers to produce a plane suited to ultra-long-haul flight paths.
Qantas's goal is to fly direct routes from the east coast of Australia to London and
New York. Trial flights have already taken place with the 787-9 Dreamliner, but
capacity is limited to 40 people to ensure a sufficient fuel range. In addition to
increased fuel efficiency and flight range, Qantas has requested improved comfort
on ultra-long-haul aircraft, given the lengthy flight times of the proposed routes. For
instance, a New York to Sydney non-stop flight is estimated to take 19 hours.
However, in May 2020, Qantas announced it is delaying its rollout of Project Sunrise
amid declining demand during the COVID-19 pandemic and subsequent loss of
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revenue. The airline has stated it hopes to reinvigorate the plan once travel
conditions normalise.
The level of technology change is High
The International Airlines industry exhibits a high level of
technological change, with most of the industry's new technology
imported from the United States and Europe.
Technological advances relate to improving the efficiency of aircraft and airlines'
administrative functions. These include acquiring more fuel-efficient aircraft,
implementing and improving online booking and check-in services, and installing
self-serve kiosks at airports.
Aircraft efficiency
Airlines are constantly focusing on upgrading their fleet in favour of
more fuel-efficient aircraft.
The main way to reduce an aircraft's fuel consumption is by modifying its design,
since planes made from lighter materials tend to use less fuel. For example, the
Airbus A380, which is made from lightweight materials, is the largest commercial
plane in the world and is used by several international airlines, including Qantas.
Many international airlines flying to and from Australia have also purchased
Boeing's 787 Dreamliner, which commenced commercial service in October 2011.
The 787 is designed to provide airlines with better fuel efficiency, as much of the
aircraft (including the fuselage and wing) is made of lightweight, composite
materials. In addition, Boeing has incorporated health-monitoring systems that
allow the aeroplane to self-monitor and report maintenance requirements to
ground-based computer systems. This aircraft has provided opportunities to
industry operators by facilitating the establishment of ultra-long-haul flights. For
instance, Qantas began offering direct flights between Perth and London in
September 2018, the only direct flight between Australia and Europe.
Despite heavily investing in new aircraft, most airlines continue to upgrade their
existing fleet to improve operating efficiency and customer experience. For
example, airlines can install new, lightweight seats to increase fuel efficiency, raise
the number of seats on the aircraft, or provide customers with more legroom. Many
airlines have introduced in-flight Wi-Fi over the past five years, updating systems in
older aircraft. Customers, particularly business travellers, have increasingly valued
remaining connected during flights to retain access to email and social media.
Airline efficiency
Technological developments have streamlined the operational
efficiency of airlines over the past five years.
These developments have largely focused on administration, including online
booking, payment, scheduling, check-in and other online self-service functions.
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These online functions have helped reduce administrative costs over the past five
years. Other technological advancements include self-serve kiosks for check-in,
mobile and internet check-in through smartphones and computers, barcoded
boarding passes, efreight and enhanced entertainment systems on aircraft.
Airlines are forecast to continue pursuing technological upgrades over the next five
years. Biometrics for aviation applications represent a strong potential growth area.
In July 2018, Qantas (together with Sydney Airport) announced that it would trial
facial recognition technology that acts as a passenger's boarding pass and
passport. However, new technologies such as biometrics may receive pushback
over concerns regarding consumer privacy. The extent to which firms introduce new
technologies over the next five years will depend on consumer acceptance and
government regulation. Firms may also introduce other technological innovations
such as robotics and augmented reality.
Revenue Volatility The level of volatility is 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 industry exhibits high revenue volatility.
The industry's cyclical nature can cause demand to fluctuate from year-to-year
based on broader macro-economic trends. Consumer sentiment, fuel prices and the
performance of national economies can all influence demand for industry services.
Other one-off events, such as security threats or terrorist attacks, can also affect
demand for air travel. Such events include the COVID-19 outbreak, which has
significantly increased industry revenue volatility.
Consumer sentiment
Swings in consumer sentiment contribute to revenue volatility.
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When consumer sentiment is negative, leisure travellers tend to cut unnecessary
expenditure as they become concerned about their future finances. As such, they
often defer or cancel planned overseas trips, negatively affecting industry revenue.
Conversely, when consumers are positive about the state of their personal finances
and the general economy, they are more inclined to travel overseas.
Fuel prices
Because fuel purchases are a significant cost for airlines, changes
in the world price of oil are a source of revenue volatility.
When world oil prices are high, operators tend to pass these costs on to travellers to
maintain profitability. This tends to reduce demand from price-sensitive travellers.
However, many airlines hedge against fluctuations in oil prices. This factor can
cause a lag between an oil price increase and airlines passing on extra costs to
consumers.
External shocks
External political or societal shocks can influence demand for air
travel.
In the past, events such as the September 11 terrorist attacks and the Bali
Bombings have deterred some people from travelling internationally. Travel
restrictions during the COVID-19 pandemic have caused the largest downturn in
industry revenue in history. These unpredictable events can contribute to revenue
volatility.
Regulation &
Policy
The level of regulation is Heavy and is Steady
The most common method of arranging airline movements from
country to country is through bilateral air agreements.
The Federal Government negotiates these agreements, which are administered by
the Department of Infrastructure, Transport, Regional Development and
Communications, and currently has agreements with 97 countries. In July 1992, the
Federal Government established the International Air Services Commission under
the International Air Services Commission Act 1992 to allocate capacity rights on
international routes among designated Australian international carriers.
International Air Transport Association (IATA)
IATA is an organisation of international airlines.
It is involved in all aspects of airline operations, and most non-government
discussions in the industry take place under IATA control. In the past, airfare
negotiations were an integral function of IATA. With the emergence of more non-
IATA members and the increased size of the market, its role is now limited to
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clearing inter-airline debts and providing general guidelines for fare setting in the
industry.
The International Civil Aviation Organisation (ICAO)
ICAO was established by the United Nations in 1944.
ICAO administers the Convention on International Civil Aviation and works with the
191 convention member states to determine international civil aviation standards
and recommended practices. Member states use these standards to ensure that
their airline regulations conform with those of every other country.
Civil Aviation Safety Authority (CASA)
In Australia, CASA manages the industry.
It 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
effective safety regulation and by encouraging the industry to deliver high
standards of safety. This includes monitoring the safety of Australian aircraft in
Australia and overseas.
CASA is also responsible for issuing Foreign Aircraft Air Operator's Certificates to
foreign airlines flying in and out of Australia. These certificates are designed to
ensure that foreign operators meet the safety standards set by ICAO. Failure to do
so could result in a foreign airline being unable to fly to and from Australia.
Government
The Federal Government imposes a 49.0% foreign ownership cap on
Qantas to ensure that Qantas remains an Australian-based carrier
and receives the full benefits of bilateral agreements.
Bilateral agreements stipulate that to qualify as an Australian international airline, a
carrier must be substantially owned and effectively controlled by Australian
nationals. However, substantial ownership and effective control does not have an
official definition. Qantas has unsuccessfully lobbied the government to lift its
ownership restrictions so it can attract cheaper capital.
The Federal Government also regulates competition in the industry through the
ACCC. In December 2009, the ACCC granted approval for Virgin Blue (now Virgin
Australia) to form an alliance with Delta Air Lines, a major US-based airline. In late
2010, the ACCC also granted approval for Virgin Australia to form an alliance with
Etihad Airways, the second-biggest airline in the United Arab Emirates. This alliance
was re-authorised by the ACCC in December 2015. These alliances aim to increase
competition in the industry.
Modern Slavery Act 2018
In November 2018, the Federal Government passed the Modern
Slavery Act 2018.
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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 released in 2020. The NSW Government is also
considering its own state-based version of the report, which would also require
businesses with consolidated annual revenue of at least $50.0 million 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 Modern Slavery Act is anticipated to have a modest effect on the International
Airlines industry. Foreign-based airlines such as Emirates and Singapore Airlines
will not be subject to the act. However, they would have to adhere to any related
legislation in their domicile country. Domestic players Qantas and Virgin Australia
will be subject to mandatory reporting standards. These firms are expected to
report a modest uptick in compliance costs, and will likely increase due diligence
along their supply chains to ensure they are not in breach of the act.
Industry
Assistance
The level of industry assistance is Low and is Steady
The International Airlines industry has a low level of industry
assistance, and this trend has remained steady over the past five
years.
International airlines do not receive any direct assistance through grants or
subsidies from the Federal Government. While tariffs do not apply to the
International Airlines industry, reductions in the cost of airport fees and landing
fees for international players aid the industry to some extent.
Since airport pricing agreements expired in 2009, the Board of Airline
Representatives of Australia (BARA), the peak representative of international
airlines operating in Australia, has called on the ACCC to investigate changes to
pricing arrangements with airport operators. BARA has advocated shifting towards
location-based airport pricing rather than a system where all airlines pay for
services across the board.
Aside from BARA, industry operators also receive assistance from the International
Air Transport Association (IATA). The IATA promotes aviation safety, provides
advice on costs and technology implementation, and provides advocacy for the
industry. In addition, the industry receives some indirect assistance from Australian
federal and state government initiatives to promote Australia as a tourism
destination.
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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) ($m)
2012–13 23,840 8,296 204 56 49,767 N/A N/A 5,302 N/A
2013–14 25,852 7,135 202 54 51,320 N/A N/A 5,823 N/A
2014–15 27,644 8,957 208 53 52,743 N/A N/A 6,052 N/A
2015–16 29,188 10,595 213 60 56,014 N/A N/A 6,813 N/A
2016–17 27,513 9,987 232 62 54,176 N/A N/A 6,651 N/A
2017–18 29,080 10,469 248 65 55,867 N/A N/A 7,021 N/A
2018–19 30,458 10,904 243 63 56,053 N/A N/A 7,063 N/A
2019–20 25,090 9,584 249 65 53,088 N/A N/A 6,132 N/A
2020–21 8,219 3,304 188 52 15,837 N/A N/A 2,320 N/A
2021–22 14,659 5,732 207 56 28,825 N/A N/A 3,883 N/A
2022–23 23,413 8,874 229 60 46,977 N/A N/A 5,917 N/A
2023–24 26,383 9,814 238 63 51,230 N/A N/A 6,494 N/A
2024–25 28,615 10,788 250 65 54,348 N/A N/A 6,973 N/A
2025–26 30,212 11,994 256 67 56,303 N/A N/A 7,301 N/A
Annual Change
Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic
Demand
(%) (%) (%) (%) (%) (%) (%) (%) (%)
2012–13 5.52 11.6 4 0 7 N/A N/A 5.34 N/A
2013–14 8.43 -14.0 -1 -4 3 N/A N/A 9.82 N/A
2014–15 6.93 25.5 3 -2 3 N/A N/A 3.93 N/A
2015–16 5.58 18.3 2 13 6 N/A N/A 12.6 N/A
2016–17 -5.74 -5.74 9 3 -3 N/A N/A -2.38 N/A
2017–18 5.69 4.82 7 5 3 N/A N/A 5.56 N/A
2018–19 4.73 4.15 -2 -3 0 N/A N/A 0.59 N/A
2019–20 -17.6 -12.1 2 3 -5 N/A N/A -13.2 N/A
2020–21 -67.3 -65.5 -24 -20 -70 N/A N/A -62.2 N/A
2021–22 78.4 73.5 10 8 82 N/A N/A 67.4 N/A
2022–23 59.7 54.8 11 7 63 N/A N/A 52.4 N/A
2023–24 12.7 10.6 4 5 9 N/A N/A 9.75 N/A
2024–25 8.46 9.91 5 3 6 N/A N/A 7.36 N/A
2025–26 5.57 11.2 2 3 4 N/A N/A 4.71 N/A
Key Ratios
Year IVA/Revenue Imports/Demand Exports/Revenue Revenue per
Employee
Wages/Revenue Employees per
estab.
Average Wage
(%) (%) (%) ($'000) (%)
2012–13 34.8 N/A N/A 479 22.2 244 106,544
2013–14 27.6 N/A N/A 504 22.5 254 113,468
2014–15 32.4 N/A N/A 524 21.9 254 114,753
2015–16 36.3 N/A N/A 521 23.3 263 121,630
2016–17 36.3 N/A N/A 508 24.2 234 122,774
2017–18 36.0 N/A N/A 521 24.1 225 125,681
2018–19 35.8 N/A N/A 543 23.2 231 126,004
2019–20 38.2 N/A N/A 473 24.4 213 115,503
2020–21 40.2 N/A N/A 519 28.2 84.2 146,486
2021–22 39.1 N/A N/A 509 26.5 139 134,703
2022–23 37.9 N/A N/A 498 25.3 205 125,949
2023–24 37.2 N/A N/A 515 24.6 215 126,764
2024–25 37.7 N/A N/A 527 24.4 217 128,295
2025–26 39.7 N/A N/A 537 24.2 220 129,680
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Additional Resources
Additional
Resources
Bureau of Infrastructure and Transport Research Economics
http://www.bitre.gov.au
Tourism Australia
http://www.tourism.australia.com
Civil Aviation Safety Authority
http://www.casa.gov.au
Board of Airline Representatives of Australia
http://www.bara.org.au
Industry Jargon APRON PARKING
Areas for aircraft parking and maintenance.
CIVIL AVIATION SAFETY AUTHORITY
The independent statutory authority that manages this industry.
CODESHARING
An agreement between two or more carriers to share the same flight while selling tickets
under different flight codes.
FUEL HEDGING
The practice of locking in fuel prices at a certain market rate to remove exposure to
fluctuations in the price of oil.
PASSENGER LOAD FACTOR
The total number of tickets sold divided by the total number of seats available, which
measures the capacity utilisation of an airline within a given time frame.
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.
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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.
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%.
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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.
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.
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