Referral of inquiry
1.1
On 9 November 2020, the following matters were referred to the Senate Rural and Regional Affairs and Transport References Committee (the committee) for inquiry and report by 31 March 2021:
The future of Australia’s aviation sector, in the context of COVID-19 and conditions post-pandemic, having particular regard to:
(a)
the importance of Australia’s aviation sector in supporting the economic and social wellbeing of all Australians;
(b)
the immediate and long-term impacts of the COVID-19 pandemic response on all aspects of the Australian aviation sector;
(c)
the immediate and long-term impacts of the COVID-19 pandemic response on all sectors that rely on aviation (e.g. tourism);
(d)
the adequacy of government industry support and procurement and programs for the social and economic well-being of workers for all sections of the aviation industry to survive the downturn caused by the pandemic;
(e)
the immediate and long-term employment landscape within Australia’s aviation sector;
(f)
what policy and practical measures would be required to assist the industry to recover in the medium term; and
1.2
Following a resolution of the committee on 3 February 2021, and in accordance with the motion agreed by the Senate on 18 February 2021, the reporting date for the inquiry was extended to 13 May 2021.
Conduct of the inquiry
1.3
The committee advertised the inquiry on its website and invited submissions from a range of relevant stakeholders, including government agencies, industry, community groups and individuals. Details regarding the inquiry and associated documents are available on the committee's webpage.
1.4
To date, the committee has received 32 submissions. This included 31 public and name withheld submissions which are published on the committee's website.
1.5
In addition, the committee held public hearings on:
28 and 29 January 2021 in Brisbane;
10 February 2021 in Sydney; and
3 and 4 March 2021 in Canberra.
Purpose of this report
1.6
It should be noted that this interim report is focussed on the immediate impact of COVID-19 on the aviation workforce. It sets out the committee's early findings on the adequacy of government support for aviation workers responsible for maintaining the viability of the aviation sector through the pandemic.
1.7
While this report outlines some of the major issues faced by the aviation sector as a result of COVID-19, it is not intended to provide an exhaustive examination of the many issues raised with the committee in written submissions, correspondence and hearings. The committee will report on these issues in greater detail in its final report.
Acknowledgments
1.8
The committee thanks all organisations and individuals who contributed to the inquiry by preparing written submissions and appearing before the committee at public hearings to give evidence.
References to Hansard
1.9
In this report, references to Committee Hansard are to proof transcripts. Page numbers may vary between proof and official transcripts.
Structure of the report
1.10
This interim report is divided into three chapters. Chapter 1 provides an overview of the committee's conduct as well as a brief background of Australia's aviation sector.
1.11
Chapter 2 outlines the Australian Government's support for aviation during COVID-19. In particular, it examines JobKeeper and relevant issues, such as eligibility criteria and the impact these have had on the aviation workforce.
1.12
Chapter 3 discusses the impact of the COVID-19 pandemic on the aviation and tourism sectors, in terms of job losses, stand downs and the resultant loss of skills. It also outlines the need for ongoing support to sustain Australia's aviation sector and ensure it is ready to lead economic recovery once travel restrictions are lifted.
An overview of Australian aviation
1.13
The following section provides an overview of Australia's aviation sector, including the importance of Australian aviation as well as discussing the impacts of COVID-19.
Importance of Australian aviation
1.14
The aviation sector makes a major contribution to Australia's economy, as well directly and indirectly supporting the employment of thousands of Australians. Submitters emphasised the role of aviation as 'a vital linchpin to the health of the Australian economy'. For example, in 2018 the aviation sector directly contributed around $20 billion to the economy, or 1 per cent of gross domestic product (GDP).
1.15
In particular, the aviation sector is integral to freight supply chains. Air freight comprises a small proportion of Australia’s international freight task by mass (0.1 per cent) but represents around 20 per cent of trade by value. In 2019, the air and space transport industry directly contributed around $10 billion to the economy, or 0.5 per cent of GDP. Furthermore, total Australian international air freight recently surpassed 1 million tonnes annually.
1.16
In its Skills Forecast published in 2019, the Aviation Industry Reference Committee, of the overarching Australian Industry and Skills Committee, revealed prior to COVID-19 Australia's aviation industry employed more than 93 000 people across five main subsectors. These are domestic commercial aviation, international commercial aviation, general aviation, air-freight transport and aviation support infrastructure.
1.17
In addition, Mr James Goodwin, Chief Executive, Australian Airports Association, estimated that Australia's airports maintained the jobs of more than 200 000 Australians.
1.18
Furthermore, EY analysis for the Business Council of Australia estimated that international aviation supports around 515 000 jobs:
248 000 jobs associated with education services for international students;
129 000 jobs associated with freight transport;
75 000 jobs associated with international holiday makers;
32 000 jobs associated domestic leisure travel; and
31 000 jobs associated with business travel.
1.19
In addition to aviation's contribution to the economy in terms of employment and contribution to GDP, it also acts as a multiplicative factor in the productivity of many other Australian sectors, facilitating business, employment, education, tourism and connectivity. For example, Mr Scott McDine, Head of ITF Sydney, International Transport Workers' Federation, informed the committee that '[w]e rely on aviation to support our valuable education and tourism industries, and to support primary producer products'.
1.20
Similarly, Ms Teri O'Toole, Federal Secretary, Flight Attendants Association of Australia, stated that:
Obviously we're a pretty broad country and we need to be able to get around it and we do need the infrastructure of aviation. It's not just tourism; absolutely everything relies on it, whether it's freight, whether it's cargo, whether it's getting from the western states to the east coast.
1.21
Submitters highlighted the following benefits delivered by the aviation sector:
access to global markets;
exploitation of geographical comparative advantages;
promoting economies of scale; and
increased investment opportunities.
1.22
The Australian Council of Trade Unions (ACTU) submitted that these benefits 'would likely add up to tens of billions of dollars per year'.
1.23
Aviation also provides a critical connection between Australian communities and the world, with international aviation being vital to Australia’s tourism sector. In 2019-20, tourism directly contributed around $50 billion to Australia’s GDP (2.5 per cent of GDP) and around 620 000 jobs (4.8 per cent of the workforce).
1.24
Moreover, the aviation sector serves as a crucial enabler and provides vital support to the agriculture, manufacturing and mining sectors:
some agricultural exports are highly dependent on aviation, with almost
80 per cent of seafood (by value) exported by air;
revenue from goods manufactured in Australia and exported by air is approximately $42 billion, or 11.7 per cent of manufacturing exports; and
Australians regularly fly from major population centres to remote mine sites for work, and thousands more fly-in fly-out workers serve the oil and gas industry.
1.25
Some remote communities are long distances from major regional centres or capital cities, making regular road transport time consuming and expensive. A number of submitters noted as a result of the vast size of the continent that Australians are heavily reliant on aviation to travel domestically.
1.26
Domestic aviation plays an important role servicing the needs of regional and remote communities across Australia by providing access to key services, including transport and freight, search and rescue operations, law enforcement and business and recreational travel. By way of example, the total number of passenger movements through regional airports increased from around
9 million in 1985 to around 26 million in 2019. In addition, Mrs Peta Rutherford, Chief Executive Officer, Rural Doctors Association of Australia, emphasised that the continued viability of regional and rural airports is essential to the provision of, and access to, healthcare.
1.27
Without these services the social and economic existence of regional and remote communities and many regional industries are at risk.
1.28
The ACTU also highlighted a number of 'immensely valuable economic benefits' provided to regional areas as a result of aviation. These included:
reducing the tyranny of distance;
lowering the costs of doing business;
increasing competition in regional markets due to greater access to alternative suppliers;
enhanced innovation due to access to a wider range of skilled workers;
improved ability to deal with temporary shortages of workers or of goods;
increased investment opportunities catalysed by familiarity with the potential place of investment, potential clients and collaborators; and
allowing for more efficient interaction between different levels of government.
1.29
In addition to noting the critical importance of the aviation sector generally, Mr Andrew Jaggers, Deputy Secretary, Commercial and Government Services, Department of Finance, argued that '[i]t will also play a significant role in the economic recovery from COVID'.
Impacts of COVID-19 on Australia's aviation sector
1.30
COVID-19 and associated travel restrictions have had a significant impact on the aviation sector. In response to the pandemic, Australian governments implemented health measures including quarantines, interstate and international border closures, limits on non-essential travel and stay at home orders. These measures, along with uncertainty for consumers, saw an unprecedented decline in air travel.
1.31
Reduced demand saw domestic flights in April 2020 fall by around 97 per cent from pre-COVID levels, while international flights into Australia largely ceased due to a ban on arrivals of non-Australian citizens. The Department of Infrastructure, Transport, Regional Development and Communications informed the committee that:
the number of domestic passengers carried on regular public transport (RPT) flights declined by around 84 per cent between October 2019 and October 2020;
total domestic RPT load factors declined from almost 85 per cent in October 2019 to below 70 per cent in October 2020; and
passenger movements at regional airports declined by around 66 per cent between October 2019 and October 2020.
1.32
In a report commissioned by the International Transport Workers' Federation, the McKell Institute found that, worldwide, by mid-April 2020 an estimated
12 400 aircraft had been placed into storage and passenger revenues for 2020 were forecast to be down $314 billion on the previous year, a drop of 48 per cent compared to around 16 per cent during the Global Financial Crisis.
1.33
In addition, COVID-19 has had a significant impact on the operations of major airlines, which are the aviation sector's key employers. This includes the following:
The Qantas Group (Qantas) announced in March 2020 a 90 per cent reduction to international capacity and 60 per cent to domestic capacity, with around 150 aircraft being grounded. It also announced that 20 000 employees would be stood down until at least May 2020. Qantas reduced domestic operations to 5 per cent of capacity during April and had only recovered to 15 per cent of capacity through June 2020.
In August 2020, Qantas announced a $2.7 billion statutory loss for financial year 2020, following a 91 per cent drop in underlying profit before tax,
$1.4 billion in write-downs and $642 million in restructuring and redundancy costs. It explained that the stand down of 20 000 employees would continue, and that 4 000 of at least 6 000 redundancies were expected to be finalised by end-September 2020. Qantas also announced it would outsource its ground handling operations, resulting in 2500 employees across 10 airports, some of whom has worked for Qantas for over a decade, losing their livelihoods.
Virgin Australia (Virgin) announced in March 2020 a 90 per cent reduction to domestic capacity, with 125 aircraft grounded. It announced that 80 per cent of its workforce would be temporarily stood down. Virgin also entered voluntary administration in April 2020, with an aim to restructure and refinance the airline. It announced in June 2020 that Bain Capital had entered into an agreement with the administrator, Deloitte, to become the new owner of the airline.
Rex Airlines made announcements in March 2020 that it would reduce its capacity by 45 per cent and subsequently suspend services entirely. However, after the federal and state governments provided assistance measures, Rex Airlines announced in April 2020 that it would run two to three return flights per week to all destinations on its network.
1.34
It is expected that the aviation industry’s recovery will be much slower than the downturn, due to the ongoing risk of domestic border closures, the staggered reopening of international travel routes and the impacts of a broader economic downturn. Even once restrictions are fully lifted, overall demand for air travel is expected to be depressed by low consumer and business confidence.
1.35
Notably, in January 2021, Professor Brendan Murphy, Secretary of the Department of Health, predicted international travel won't resume until 2022. Meanwhile, the latest International Air Transport Association forecast expects global passenger traffic to return to 2019 levels in 2024 at the earliest, with domestic markets recovering faster than international services.