Profit margins are expected to recover over the next five years as Qantas and Virgin relax competition.
Melbourne, Australia (PRWEB) November 19, 2014
The past five-year period for operators in the Domestic Airlines industry in Australia started on the back foot, with deteriorating global economic conditions causing a drop in industry revenue in 2008-09 and 2009-10. A high Australian dollar prompted travellers to make international travel plans instead of travelling domestically. According to IBISWorld industry analyst Ryan Lin, “some business travellers abandoned air travel in favour of teleconferences and other forms of electronic communication.” Demand also weakened as Australian tourists shelved travel plans, with consumer confidence falling.
In response to declining demand and rising competition, operators slashed prices. The heavy discounting and reductions in the fuel excise resulted in passenger numbers stabilising in 2009-10 and 2010-11. As a result, IBISWorld expects industry revenue to grow at an annualised 2.6% over the five years through 2014-15, to reach $15.2 billion. “Passenger traffic is expected to continue its upward trend in 2014-15 due to a sustained rise in discretionary incomes since 2009-10,” says Lin. Industry revenue is forecast to grow by 3.0% in 2014-15 as the Australian dollar softens, spurring domestic travel demand. The industry has a high level of market share concentration. Major players include Qantas Airways Limited and Virgin Australia Holdings Limited.
Domestic airlines have reduced capacity, cut underperforming routes and discounted prices to align supply with demand and attract more passengers. Strong price competition from low-cost airlines has prevented a major recovery in profit margins. However, as Qantas and Virgin relax their competitive stance, profit margins are expected to recover over the next five years. Over the next five years, the Domestic Airlines industry is expected to grow as demand for air travel rises, especially from the high-growth Asian region. However, higher fuel prices will lift airfares and constrain potential industry revenue growth. The level of competition is expected to remain high.
For more information, visit IBISWorld’s Domestic Airlines industry in Australia report page.
Domestic airlines operate aircraft on scheduled domestic routes, for the transportation of passengers and freight.
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