When the global economic downturn hit, business travellers abandoned air travel in favour of teleconferences and e-mail
Melbourne, Australia (PRWEB) August 16, 2012
The past five years started with buoyant demand for air travel and high fuel prices boosted ticket prices. However, the Domestic Airlines industry faced major hurdles when the global economic downturn hit. Higher unemployment and a decline in discretionary income slowed demand for air travel in Australia. In particular, business travellers abandoned air travel in favour of teleconferences and e-mail. According to IBISWorld industry analyst Caroline Finch, “demand also weakened as Australians tourists shelved their travel plans”.
In response to the declining demand in late 2008, operators slashed prices. Finch explains, “although price-cutting helped maintain passenger numbers, industry revenue and profit margins suffered”. IBISWorld expects industry revenue to grow an annualised 0.2% over the five years through 2012-13 to reach $15.7 billion. This low growth reflects the magnitude of the decline in revenue in 2008-09, as industry revenue has grown year on year since 2010-11. Passenger traffic is expected to hold its long-term growth path in 2012-13 due to low unemployment. Consequently, industry revenue is expected to grow by approximately 5.2% in 2012-13. In the coming five years, domestic airlines are expected to expand capacity as demand for air travel returns. However, higher fuel prices will lift airfares and slow potential industry revenue growth. Furthermore, competition is expected to intensify over the next five years.
The Domestic Airlines industry is essentially a duopoly, therefore market share concentration is high. Two major companies, the Qantas Group and the Virgin Blue Airlines Group, dominate the industry. In practice though, three main businesses, Qantas, Jetstar and Virgin Australia, compete on most routes. The air transport industry has a high level of market share concentration in every country. The level of fixed costs to operate a particular route determines an operator's decision to fly to a destination. Airlines incur fixed costs prior to the delivery of a service and are independent of output. Therefore, airlines will only provide a service if there is a sufficient market.
For more information, visit IBISWorld’s Domestic Airlines report in Australia industry page.
Follow IBISWorld on Twitter: http://twitter.com/#!/ibisworldau
IBISWorld industry Report Key Topics
Domestic airlines operate aircraft on scheduled domestic routes, for the transportation of passengers and freight.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
About IBISWorld Inc.
Recognised as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every Australian industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Melbourne, IBISWorld serves a range of business, professional service and government organisations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com.au or call (03) 9655 3886.