Aviation and tourism

BRIEFING NOTE SUMMARY

• Cairns is one of Australia’s most aviation dependent communities, with more than three times as many passenger movements per resident (31.6) compared to a city such as Brisbane (9.7). • During COVID-19, Cairns lost 95% of its total air capacity for the three months ending June 2020.

Globally, international airline capacity is not expected to return to pre-

COVID capacity until after 2023. • 52% of TNQ’s 3 million visitors per annum come through the airport.

Aviation capacity is currently sitting at less than 55% of pre-COVID seat capacity. • COVID-19 has had a disproportionate impact on the region with a forecast loss of $2.2 billion in 2021, impacting on more than 7,700 jobs in the visitor economy. • A Queensland Government investment of $100 million over four years is needed to boost statewide aviation capacity. In addition, TTNQ requires $10 million over four years to boost event tourism.

THE ISSUE

TNQ is one of the destinations most affected by COVID-19 in Australia, with visitor spend estimated to have fallen $2 billion in 2020 and domestic and international aviation seat capacity predicted to remain at less than 50 per cent of pre-COVID levels for at least the next two years. This would impact more than 7700 jobs in the region from the visitor economy. TNQ stretches from Cardwell to the Torres Strait and west to the Northern Territory border and receives nearly three million domestic and international visitors annually. This equated to an estimated $3.5 billion in annual visitor spend in the year ended March 2020. Two-thirds of the region’s visitor nights are domestic travellers, and one-third international.

While international borders are currently closed, when they do reopen the reintroduction of international aviation capacity to Australia is likely to be slow. Cairns airport must therefore seek to maximise opportunities to recover domestic airline capacity and take advantage of travel ‘bubbles’ to markets such as New Zealand, Singapore or Japan as and when they become available.

With limited international flights returning to Cairns in the coming 12-18 months, capturing as much domestic capacity as possible is crucial to support and re-energise the tourism sector and the local economy. The Cairns community welcomed the support of Governments in providing direct support to the airlines (Federal) and the airports (State) to support the reintroduction of domestic services to Cairns and across the region.

Air connectivity is key to the economic development of the Cairns region. It opens up new visitor markets, enables the export of agricultural produce and promotes growth in the education sector. A daily international wide-body flight to Cairns is potentially a $200 million a year export business, with $100 million of international visitor spend, $50-$150 million of agricultural produce sales, and the potential to deliver more than 650 new jobs widely dispersed across the region.

Cairns Airport is the nation’s seventh busiest in terms of combined international and domestic passenger movements. It has historically handled around 130,000 aircraft and over 5.2 million passenger movements per year. The airport is widely recognised as one of the most significant economic drivers in the Tropical North Queensland (TNQ) region and its facilities are critical pieces of economic infrastructure.

As the COVID-19 uncertainty and international border closures continue, further assistance is needed. The key international and domestic aviation gateways of Queensland (Cairns, Sunshine Coast, Brisbane and Gold Coast) joined forces to present an opportunity to government to review the current approach to aviation attraction funding structures and programs. A COVID recovery paper presented in March 2020 recommends a statewide investment in a new Aviation Capacity Expansion (ACE) program of $100 million over four years and continued Federal Government support for freight and international services under the International Freight Assistance Mechanism (IFAM).

The route stimulus funding from government resulted in a return of nearly 70% of pre-COVID domestic seat capacity in December, when all state borders were briefly open for leisure travel (although that has since fallen and continues to do so). Packages such as the Alliance Airlines subsidy for the Sunshine Coast generated 931 seat sales, while the Virgin Australia seat subsidy in NovemberDecember generated 2422.

COUNCIL: ALL TNQ STATE ELECTORATE: ALL TNQ FEDERAL ELECTORATE: KENNEDY, LEICHHARDT

BACKGROUND

At a time of continued uncertainty around international services, funding provided by IFAM to support freight operations from Cairns has been critical to the local economy and livelihoods of those in the supply chain. Services to Hong Kong, Singapore and Tokyo have benefited from IFAM and have allowed the local freight industry to consider a diversified market approach that the previous capacity provided by passenger aircraft had not.

For example, SilkAir Cairns-Singapore has used the narrow body Boeing 737 aircraft with little scope for freight. During COVID19, when international passenger services into Cairns have all but ceased, the IFAM-supported wide body Airbus A350 passenger aircraft (operating as a freighter) allowed commodities such as seafood to be carried into Singapore and beyond on the vast Singapore Airlines network. Continued and expanded support from IFAM may aid in the transition back to passenger services as it facilitates a proven cargo demand profile which complements a steady return of global visitors to the region.

For many years the true potential for local land and sea produce has not been realised due to the limited international air capacity from Cairns. Backtracking to Brisbane is not a viable option for many producers, however what IFAM has achieved has been the raising of awareness, and the commitment to introduce dedicated freight services from our region and we believe this is just the start of how both the passenger and freight components of our economy can thrive in a post COVID world.

Ongoing investment in destination marketing for Cairns and Great Barrier Reef will be vital to the region’s recovery once borders reopen. An investment of at least $10 million per annum should be supported for the region, through the cooperation of Tourism Australia, Tourism and Events Queensland and Tourism Tropical North Queensland with funding from the Cairns Airport and Cairns Regional Council along with industry.

The visitor economy, made up of holiday, visiting friends and relatives, business events, major events and education visitors, contributes over 17 per cent of our Gross Regional Product (GRP), supporting one in five jobs directly and indirectly.

The impact of global travel restrictions from COVID-19 has seen the visitor economy come to a virtual standstill since March. As the industry emerges it is clear that the key to the recovery of the visitor economy, and the wider regional economy, is aviation-led.

In addition to marketing support, industry needs to reconnect with the global travel trade following the decimation of travel wholesale and retail partners for our region globally. The Export Market Development Grant (EMDG) has provided the incentive for Australian businesses to establish trade links that drive the $30B international tourism sector in Australia.

Proposed changes to the ‘rules’ associated with the EMDG will reduce both the number of eligible businesses and the $ amount each receives. The opposite is needed: Government should be ‘resetting’ the eight-year limit on EMDG eligibility for existing operators, maintaining the current eligibility threshold level and increasing the level of support to kick-start Australia’s trade-driven COVID recovery.

NEXT STEPS

• The Attracting Aviation Investment

Fund (AAIF) and Connecting With

Asia Fund (CWA) were due to expire at the end of FY20. To replace the

AAIF and support both domestic and international route retention longer term, the development of an

Aviation Capacity Expansion (ACE) program has been proposed by

Queensland airports and tourism regions. • The Federal Government’s

International Freight Assistance

Mechanism (IFAM) needs to be extended to encourage diversification of markets in Asia and beyond for regional hubs such as

Cairns. • A new fund should be established to drive aviation capacity, supported by increased destination marketing. • Enabling the Australian travel and tourism sector to reconnect face-to-face with international wholesalers and retailers (once

COVID restrictions ease) is pivotal to recovery.

• To preserve and grow food and other exports, the Federal Government should extend its IFAM program to December 31, 2021. • To maximise domestic travel while international borders are closed, the

Federal Government should continue to support air services to regional communities such as Cairns. • The Attracting Aviation Investment Fund and Connecting With Asia Fund should be replaced with a $100M Aviation Capacity Expansion program over four years. • Tourism Australia and Tourism Events QLD should provide the TNQ region with at least $10M in destination marketing funds per annum split 50:50. • The ‘rules’ associated with the EMDG should be reset for existing operators who have already received support for eight years, and thresholds for eligibility be retained until the impacts on global travel are better known. The level of support for individual businesses should increase. ESTIMATED PROJECT COST $110M 20212022 20222023 20232024 20242025

Recommended State Investment

$30m $30m $30m $30m

Recommended Federal Investment $5m $5m $5m $5m