AUSTRALIAN AIRPORTS
Chris Frame speaks with James Goodwin, the new CEO of the Australian Airports Association, about the industry’s proactive response to the COVID-19 crisis
About...
Prior to joining the AAA in June 2020, James served as chief executive of the Australasian New Car Assessment Program (ANCAP). ANCAP is an organisation that aims to provide consumers with independent advice and information on vehicle safety. Before joining ANCAP, he held the position of director – government relations and communications at the Australian Automobile Association. Other notable experience includes a senior community and corporate affairs position at Airservices Australia, the Australian government agency providing air traffic management and firefighting services at airports. He is also a former journalist and news presenter, having worked for major network news outlets in Sydney and Canberra, including several years in the parliamentary press gallery.
During the years preceding the coronavirus pandemic, Australian airports had been enjoying unparalleled growth. From 2008-2019, international passenger traffic increased at an average rate of 6% each year. In response, airport operators spent much of the past decade adjusting to a rapidly expanding aviation landscape, fuelled by high demand and primarily driven by growth in China and India. Facilities across the nation have invested huge sums to expand and strengthen airport and aviation infrastructure.
James Goodwin is the newly appointed CEO of the Australian Airports Association (AAA). He explained to Airports International that to help the country’s gateways handle the anticipated boost in passenger numbers, significant projects were commissioned to ensure that facilities remained fit for purpose and able to cope: “Airports upgraded runways and airfields to maintain government regulatory compliance. They expanded and improved terminals to ensure adequate security screening infrastructure was in place and that retail and dining precincts were world-class.”
Notable recent projects include Brisbane Airport’s AU$1.1bn investment in a new parallel runway system (see Airports International, August/September 2020), as well as Melbourne Airport’s AU$550m outlay on a new terminal dedicated exclusively to leisure travellers.
Furthermore, the creation of the brandnew AU$338m domestic terminal at Perth Airport revitalised Western Australia’s primary gateway, while Sydney/Kingsford Smith – Australia’s busiest airport – spent millions on updating the departure hall with new passenger amenities, enhanced dining options and a vastly expanded retail offering.
Accommodating the emergence of highly fuel-efficient next-generation airliners – such as the Boeing 787 and Airbus A350 – has also paid off handsomely in Australia. These aircraft challenge the long-haul ‘hub and spoke’ paradigm, introducing an array of new point-topoint flying options. Until recently, the successful integration of next-generation aircraft into airline fleets worldwide – including at national carrier Qantas – provided a much-needed boost to the variety of destinations accessible directly from Australian gateways.
Additionally, China had become the largest contributor to Australian inbound travel by 2018, with carriers such as Beijing Capital Airlines, Hainan Airlines and XiamenAir all becoming a more common sight at Aussie airports. Elsewhere, low-cost firms including Jetstar, AirAsia and Scoot also played a pivotal role in opening up Australia’s smaller sites to the international market, meaning access to tourism hotspots was becoming globally competitive.
Smaller gateways further from the major hubs also benefitted from these developments in recent years. Complexes situated in regional locations, or on the outskirts of major cities, were now able to build viable business cases, creating opportunities for affordable leisure travel. Additionally, some business travellers opted to fly direct to local airports, rather than make the trek through Australia’s state capitals.
All in all, by the end of 2019, Australia’s airports were firmly established as a key contributor to the national economy. AAA data suggests the sector accounted for approximately 2% of Australia’s gross domestic product (GDP) – valued at AU$35bn – while airports supported the employment of 206,000 people across the nation. All the major industry forecasts pointed towards 2020 being another stellar year. That was, until the emergence of the coronavirus pandemic.
COVID effect
Unsurprisingly, Australia’s airport growth stalled earlier this year as COVID-19 took hold around the globe. The country’s aviation industry has been hit hard by the drop in traffic, as it faces its darkest days in a generation.
“Prior to the pandemic, the airport sector was adapting to growth in international travel to Australia, particularly from China and India, by trialling new direct routes from regular and low-cost carriers to secondary airports other than the ‘Big 4’ [Sydney, Brisbane, Melbourne and Perth],” noted Goodwin. “There was a high demand for direct flights to high-value tourism destinations, such as Hamilton Island, Launceston, Cairns, Gold Coast, Adelaide and Broome.”
This demand meant Australia’s largest airports were not the only facilities investing in immediate infrastructure projects. Smaller capital city gateways focused time and energy on long-term growth, with Adelaide alone injecting approximately AU$165m into the local economy through the redesign and redevelopment of its terminal to accommodate growing international demand. Elsewhere, Launceston had greatly refined its customer experience in recent years through the creation of an enhanced in-terminal experience that aims to link travellers to various Tasmanian producers.
The Australian government was particularly proactive in its approach towards COVID-19, declaring the virus as a pandemic on February 17, ahead of the World Health Organization’s official declaration in March.
“The swift action by governments to shut off international borders and place people into lockdowns meant the aviation industry was one of the first to feel the devastating effects of the COVID-19 pandemic,” Goodwin said, reflecting on the early days of the crisis.
Airport bosses noticed an early drop in passenger numbers as Australia implemented a series of travel bans to hard-hit regions, including mainland China. When Australia’s international border was closed to all traffic, the industry faced collapse. The lack of foreign inbound visitors was compounded by a rise in local cases, meaning domestic travel restrictions came into place throughout April, with many states establishing ‘hard borders’, including Tasmania, South Australia, Western Australia and Queensland.
These measures have been largely successful in keeping the transmission of COVID-19 comparatively low in Australia. However, they have imposed significant hardship on the Australian airport sector; with AAA data indicating a 97% drop in domestic and 98% drop in international travel during the height of the restrictions in April. “Without passengers, airports struggle to survive. It doesn’t matter if there is one flight coming in or 100 – the fixed costs of operating an airport remain largely the same,” highlighted Goodwin.
The AAA chief said that these costs include a variety of elements which simply weren’t a factor in years gone by. “Government-mandated requirements such as domestic and international security screening, increased terminal cleaning regimes and extra airfield security are burning huge holes in the wallets of many of our larger airports… We believe it’s only fair that the government offsets these costs [that are estimated at] AU$167m.”
With borders closed and countless Aussie nationals overseas, the government worked with key stakeholders to establish repatriation flights. Goodwin stressed that Australian airports were a vital player in this important work, describing them as “good corporate citizens” during the unfolding emergency.
“As an essential and critical piece of infrastructure, airports have been assisting governments through the pandemic, keeping runways and terminals open to allow repatriation flights, to maintain freight movements, to get medical professionals and essential workers to where they’re needed and to keep government initiatives, such as the Regional Airline Network Support Program [a government scheme aimed at maintaining air links with regional Australia] operating.”
Cargo focus
Goodwin said airports have also facilitated the ongoing and vital movement of freight, despite the drastic reductions in passenger aircraft denting cargo capacity.
Prior to the crisis, much of the airfreight delivered to Australia was transported in the belly holds of passenger aircraft. “Analysis by the AAA indicates that [cargo] capacity reduced on both international and domestic networks by about 12% in 2019/20 compared with 2018/19,” Goodwin said.
To avoid shortages, Goodwin explained that the federal government’s International Freight Assistance Mechanism helped to keep international cargo routes operating and the costs low. “These flights are ensuring Australia’s world-class food, fibre and manufactured goods are reaching global markets quickly.”
Air traffic has also been vital to the ongoing viability of Australia’s minerals sector, which is a significant contributor to the nation’s wider economy. A Reserve Bank of Australia snapshot published on September 4, 2020 estimated that mining accounts for 10% of the country’s industrial output, while national natural resources make up a staggering 62% of all Australian exports.
Perth Airport, which is situated in mineral-rich Western Australia, has been a particularly important asset throughout 2020 as it facilitates ‘fly-in, fly-out’ (FIFO) workers accessing the countless remote mining sites across a state that covers more than a million square miles.
“This [reliance on airports] all comes at a significant cost,” said Goodwin, who revealed that Australian airports have collectively lost approximately $300m each month during the pandemic “Australia’s major airports were already among the world’s most lean and efficient before the pandemic, and now they’re reaching the limits of how much they can absorb.”
By mid-2020, the country had effectively ‘flattened the curve’, to use the scientific terminology. As such, some internal borders started to reopen, leading the industry to experience a slight rebound. However, fresh outbreaks in the highly populated Victoria, New South Wales and Queensland have led to a tightening of restrictions. “Due to tight internal border controls, very few people are using aircraft to travel, making it increasingly difficult for our aviation sector to recover. Across the board, more than 20% of staff have either been laid off or put on reduced hours and therefore less pay.”
A silver lining?
Despite facing unprecedented financial challenges in 2020, Australia’s airport sector isn’t sitting still. On the contrary, a lack of aircraft traffic movements provides one unexpected benefit: access to the airfield. “If there’s one positive to come from the lack of [airliners] taking off and landing, it’s allowing for essential upgrades at our airports. The federal government’s AU$100m Regional Airports Program has been a huge help in getting important projects off the ground at many regional [facilities], which face an infrastructure deficit over the next few years of more than AU$170m.”
Goodwin believes this initiative should offer significant long-term benefits to medium-sized gateways, particularly those in tourism-rich areas, such as the Whitsunday Islands (off the coast of Queensland), Newcastle and Broome.
“Investing in critical aeronautical infrastructure projects, such as upgrading taxiways, building perimeter fencing and resurfacing runways, will create new jobs and boost spending in regional communities at a time when they need it most. For example, Newcastle Airport requires AU$25m for taxiway and runway upgrades to cater for long-range aircraft. A project of this size and scope would support more than 4,400 jobs and add AU$12.1bn to the regional northern New South Wales economy.”
Next steps
While international borders are likely to remain closed to most incoming traffic for the remainder of 2020, the AAA has been working with airports to advocate for the safe and responsible reopening of air services across the country. To aid in this effort, the organisation has participated in the creation of the Domestic Passenger Journey Protocol, which has been jointly developed by airports and airlines, approved by the Australian Health Principal Protection Committee and endorsed by the national cabinet, which was formed in March and comprises the prime minister, state premiers and territory chief ministers. “The Protocol provides a clear and consistent guide for workers and passengers to follow at domestic airports and on aircraft to minimise the spread of COVID-19,” said Goodwin, who emphasised that Australian airports will follow advice provided by the health authorities and “work with governments to facilitate the implementation of any further protocols.”
Looking at the next steps, Goodwin revealed that the AAA has identified numerous ways the Australian government could further support the sector, including: “funding an AU$437m airport relief and recovery plan.” According to the AAA, this includes an AU$237m component targeted at the immediate needs of the airport industry to help put it in the best position possible for when aviation and tourism return to normal.
The association is calling on the government to “maintain JobKeeper [a wage support programme] to already eligible airport staff for a further six months to September 2021”, which the AAA says will cost AU$37m. Additionally, the organisation is seeking the extension of JobKeeper to staff at ineligible regional airports, which Goodwin confirmed will cost around AU$33m.
“The recovery component of our plan is costed at AU$200m and includes reimbursing airports for capital costs incurred in rolling out new security screening infrastructure mandated by the Australian government.”
Goodwin has described the Regional Airport Program as “a terrific initiative which the AAA fought hard to deliver”, but noted that “in these increasingly difficult times, our council-owned regional airports are struggling to stump up the remaining 50% co-contribution.”
As such, the AAA is calling on a 25:75 funding split for future rounds, to assist regional councils in establishing projects that will aid in creating jobs. However, without an increase in passenger numbers airports will continue to struggle. In brief, the AAA is calling for “the best financial support governments can provide”, such as a commitment to reopen the borders. According to Goodwin, this would “help give Australians the confidence to travel by plane again, increase passenger numbers and help airlines and airports to successfully run their businesses.”
However, with indications that it may be some time before borders reopen, there could be a long wait until the industry returns to a more positive rate of climb.
