Australia’s smaller airports primed for take-off

Despite the odd pocket of turbulence, demand for airline seats has proved reliably strong thanks to the high Australian dollar, fly-in-fly-out mining workers and the growth of outbound tourism in Asia.

While everyone agrees improving air services and connections is vital, the debate about how to invest in that improvement often brings a sudden halt to the conversation.

That queasiness was on full display during the recent federal election debate when leaders were asked about Sydney’s proposed second airport – why not just build the thing?

Tony Abbot promised a decision by the end of his first term, but  a new airport at the Badgerys Creek site would bring low-flying Airbus 380s and Boeing Dreamliners to five federal electorates – just the thing to infuriate voters.

If Abbott decides to duck the controversy, he’ll be joining a proud Australian tradition: PMs Hawke, Keating, Howard, Rudd and Gillard all deferred a decision and no one is expecting work  on a second airport to start any time soon.

With Australia’s largest air gateway rapidly approaching capacity, the delay is making many in the tourism and airline sector nervous. According to the Productivity Commission, passenger traffic is forecast to double in the next two decades.

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While the impasse in Sydney continues, other major airports are capitalising on the delay. The latest figures from the Bureau of Infrastructure, Transport and Regional Economics show Melbourne passenger movements rising 5.5% last year, followed by Perth with an increase of 4.8%.

Domestic travel growth was slow across Australia at 3.2%, but the real action was in the international terminals. The high dollar is tempting more Australians to travel overseas and the inbound tourist market is growing fast, especially from China.

While Sydney still takes the greatest share of this market, Adelaide captured a jump in international travellers of 20.9%, followed by the Gold Coast with a 12.7% rise.

The growth in these destinations has not been a focus for many, but it holds the potential to change Australia’s airport market permanently.

That’s because the dominant expansion format in the airline business, laid down by American carrier South West in the 1990s, relies on low fares, frequent flights and the reduced ground costs of second-string airports. This template is being followed by many of the world’s fast-growing airlines, including Ryanair and EasyJet in Europe and a host of no frills airlines in Asia.

It is these low-cost Asian carriers that dominate the fastest-building part of the Australian market – Chinese tourists. In 2013 there was a whopping 42% increase in Chinese arrivals, who brought with them $4.5 billion in visitor spending money, according to Tourism Australia.

While the delays in Sydney continue, the $28 billion visitor spending market and the airports’ lucrative retail and concession business is drifting away from the harbour city.

It’s only the start, but Australia may be following the pattern set in leading  travel markets like Spain, Thailand and the US, with more flights headed out of high-cost hubs and into regional airports.