The days of cheap and easy air travel may be over, but Australian policymakers seem oblivious | Satyajit Das

HEadlines and hashtags about “air-mageddon” and “being Joyced” (delays, cancellations and lost luggage) miss an essential point – air travel is unlikely to return to what it was before, at least not anytime soon.

Australians living at the “end of the world” (a phrase attributed to but denied by former Europhile Prime Minister Paul Keating) depend on mobility. Cheap air travel, based on large, efficient aircraft and low-cost airlines, fostered an illusion of integration that is returning.

One problem is the higher cost of domestic and international air travel, with base fares often over 50%. On the plane end, a return trip to the US now costs about the same as a compact car.

The increases reflect losses (about US$190 billion over 2020 and 2021) and increased debt (US$220 billion) that airlines must recover or pay. There are additional costs to resuming operations – rehiring and training staff, re-entering aircraft – which are compounded by a shortage of skilled workers. Higher fuel prices, which account for as much as a third of an airline’s costs, Covid-19 disruptions and airports unable to cope with an increase in flights add to operating costs.

Another obstacle is greater uncertainty – forced cancellation due to isolation, possible exposure during travel, possible re-quarantine and the risk of being stranded, all compounded by expensive and unclear travel insurance coverage.

While some problems will ease as pressures from “revenge travel” (pent-up demand following pandemic-forced lockdowns) ease, others are structural. Higher oil prices (a finite resource) and climate change (aircraft emissions are difficult to eliminate) will continue to affect the cost of air travel.

Given its international isolation and vast inland distances, the economic and social impact of expensive or more restricted air travel for Australia is substantial.

Australia’s income from tourism and education exports supports hundreds of thousands of jobs and communities and subsidizes the country’s universities. In the period before the 2019 pandemic, about 28,000 international visitors arrived in Australia every day for leisure, study or work, spending about $65 billion, accounting for 13% of exports and 3% of GDP. This relies almost entirely on efficient and affordable air connections. Rising tariffs make Australia less competitive. Locals cannot fully compensate for the economic loss of reduced international arrivals.

Reduced mobility affects the movement of work and loads. Primary industries are often located in remote areas and must rely on labor, supplies and services. Australia is dependent on imports for many industrial and consumer goods. A high percentage – especially perishable or time-sensitive items such as pharmaceuticals, 90% of which are produced abroad – are transported in the holds of passenger planes. Fewer flights equals higher costs, delays and reduced availability.

Australia has relied for decades on immigration to support growth and meet labor force requirements. Higher travel costs make Australia a less favored destination where the potential migrant has a choice. The recurring expense of visiting family and friends left behind may discourage potential applicants. Similarly, skilled contract workers on short-term contracts, who typically want to avoid the disruption of relocating families, may be less willing to take up positions.

Barriers to travel affect life expectancy. Australians anticipating overseas travel after graduation or post-retirement may now have more limited choices. The post-pandemic world may see people traveling as they please, while others have to save up for the same opportunities. This disparity can fuel already growing social tensions. Lack of exposure to different cultures may also increase Australia’s existing xenophobia and complicate attitudes towards foreign affairs and development aid.

Policymakers seem oblivious to these issues, despite promoting initiatives to encourage immigration, attract short-term workers, and increase tourism and foreign students, all of which require travel. Given the continent’s geography and economic reliance on mobility, transport links should be considered essential infrastructure. However, there seems to be no coherent strategy.

Australian domestic travel has evolved into a de facto monopoly with limited competition and choice. International connections are now limited because Qantas, the national carrier, focuses on profitable domestic destinations and foreign companies have suspended or reduced flights to Australia for commercial reasons.

Having sold national assets such as airlines and airports, and joining market solutions, the state is in a weak position to intervene. In a case of missed opportunities, the Australian government gave Qantas generous aid during the pandemic (about $2 billion) without asking for a stake or the ability to influence future operations.

Without attention to this issue, it is likely that what US geographer William Bunge called the “tyranny of distance” will damage Australia’s post-Covid recovery and future prospects.

Satyajit Das is the author of Fortune’s Fool: The Australian Election (March 2022) and A Banquet of Consequences – Refreshed (March 2021)

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