Rising airfares and flights

Alan Kohler was shocked last night that discount airfares had risen 38.9% in December.

Kohler 1

Note that the 38.9% is an increase on the previous month and not on the previous year. The BITRE data presented here appears to have come via CommSec who are possessed of sound clickbait skills. So to refer to BITRE:

Indexes are constructed from BITRE’s monthly survey of airline internet booking sites. Fares are recorded only when they are available on the nominated day of travel (the last Thursday of the month). The series is a price index of the lowest available fare in each fare class, weighted over selected routes.

Occasionally, the index may record an unusual result when the nominated day of travel falls on, or adjacent to, a public holiday:

The travel date fell the day after a public holiday in April 2018 and December 2018.

To return to the above chart note the initial point which is the Christmas spike in December 2012. Keen dayologists will recognise that 6 years ago was the last time the Thursday survey date fell immediately after Boxing Day. The discount airfare index increased 53.2% that year compared to the prior month. A similar spike can also be found in March this year when the early Easter shifted Good Friday to the day after the survey date. So no, not unusual.

However, airfare trends are rising in line with airline profits and Allan Joyce’s bonus as capacity discipline is maintained. In positive news though, Qantas has just announced increased capacity:

Qantas is ramping up its flights to Queensland with more domestic services to Cairns, the Sunshine Coast, Townsville and Mount Isa, along with new business class options for travellers jetting from Sydney and Melbourne to Far North Queensland.

On the Brisbane-Cairns route, Qantas currently provides up to four daily return flights, but from late March, 11 additional weekly return services will be added to the schedule.

That should provide a welcome boost to the recent weak trend at the airport.

Also, I hadn’t looked through the BITRE airfare data before but it includes a neat interactive feature where you can explore data by route such as BNE-CNS:

Kohler 2

 

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Hard grind at Reef

Reef Casino (ASX:RCT) has posted estimated distribution and guidance for 2018:

In the second half, hotel operations have continued to perform strongly. Casino operations have been lower because of strong local slots competition, a softer Chinese tourist market and lower spending by patrons generally. The recently completed Casino Refresh Project resulted in some disruptions however the casino now has a more competitive product.

RCT reports on a calendar financial year. The estimated profit of approximately $10 million is the lowest result since 2010. The second half result in particular is a concern:

RCT 2H2018

  1. The commentary on China is consistent with flat ABS arrivals data despite direct flights to Cairns throughout the 2H period.
  2. The commentary on lower slots (pokies) is in contrast to booming numbers at pubs & clubs in Cairns including other venues in the City SA2. Should be an imminent update on that data for November.

All interesting in the context of a new casino proposal for the “global tourism hub”.

Issues with OAD & IVS

There has been an issue with the International Visitor Survey (IVS) around purpose of visit data. This hasn’t been provided for recent quarters with the most recent data for the year to December 2017. The IVS requires benchmark data on this from ABS Overseas Arrivals & Departures (OAD). TRA have indicated issues with this as the reason purpose of visit data has been withheld in the IVS. The ABS explains:

In July 2017, the Australian Government Department of Home Affairs introduced changes to the incoming passenger card. The change was to capture the main reason for journey for both residents returning, and visitors arriving in Australia. The ABS has noted changes in the distribution of responses to the question on main reason for journey for short-term visitor arrivals in recent months, notably an increase in the number of persons reporting that the main reason for travel was visiting friends and relatives and a decline in the number of persons reporting the main reason was a holiday. From investigations by Home Affairs changes were made to their process of coding main reason for journey from the new incoming passenger card, and to further assist in improving quality the imputation for main reason for journey was reviewed and improved by the ABS.

Clear as mud. Holiday and VFR (visiting friends & relatives) are overwhelmingly the dominant categories for short term (< 1 year) arrivals. Here is what it looks like over the last 5 years or so in terms of rolling annual growth for these categories;

OAD September 1

The inverse correlation since 2015 is just a bit curious. Where this becomes interesting is that Queensland appears to have recently had something of a revival in arrivals growth for state of intended stay in the ABS data mostly at the expense of NSW:

OAD September 2

The green & gold snake there is Straya. However, short term arrivals in Queensland are more heavily weighted to the holiday sector than other major states. Category by state only comes with the IVS and not the ABS data. IVS category share by state data year to December 2017 for major categories:

NSW          Vic          Qld
Holiday                   58.9%       53.5%      70.0%
VFR                          27.2%       32.1%      24.0%
Business                  11.3%       11.2%       6.9%
Employment             2.3%        2.2%       1.9%
Education                 5.4%        6.3%        4.1%

Yet, growth in Queensland has rebounded while the holiday sector has been flat for Australian arrivals? Should be interesting when we finally get the IVS numbers from TRA.

Note: State totals sum to more than 100% related to note b in table 4:  “b. Individual purpose totals will not sum to the State total as international visitors may have visited more than one region within the state for different purposes while in Australia”

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