It is true there are 1 million unemployed... but there are also 12 million still in work. While we rightly focus on the hardship of those without work, we can't necessarily base the entire recovery of the travel industry on the 1 million?
I'm sure there are endless possibilities for airlines if they think outside the box. Instead of $1200 fares to europe, why not $1800 but have 50% more room for everyone? Partially covers the health issues, and certainly covers the comfort. JAL were turning a nice profit with low density.
There's an old joke that many have forgotten within Australia:
"A Recession is when someone you know has lost their job. A Depression is when you lose your job."
The downturn in the 1990s was the first time since the 1920s that doctors, lawyers, accountants etc got laid off in numbers. That's what is happening this time around even now. Yes some medical staff are on job keeper or have been laid off due to elective surgery being cut & equally people have been cancelling other elective surgery due to either their income reductions or job loss.
For those young enough (under 40 or so) not to have lived through a real recession - this is a new experience. How many movies or TV programs have you seen that deal with people living in modern times going through a recession?
Q's A380s are very costly to run vs other airframes. Unless they have a 'premium rich' load & say 85%+ overall then they don't cover their cash costs.
One aspect, that has received very little media coverage, is the inability to get CV travel insurance for less than multiple times the cost of most international holiday costs - say to Hawaii, LA etc. Not that there are any direct flights from Australia to Hawaii (other than perhaps for Scomo).
Many businesses will cut costs where they can - premium travel is always one of the first to go. An easy trade was to sell British Airways when you felt the US growth had peaked - and the guide to that used to be the Merrill Lynch share price. The 1st & business class trans-Atlantic demand would get cut by anywhere up to 90% (from New York).
Long before CV came on the agenda, many businesses cancelled visits to their regional HQs based in HK which was why so many companies (in Australia & the Asia Pacific) were able to move to widespread video conferencing on a much more significant scale earlier this year - they'd already invented the wheel & established greater capacity.
Plan A = some vaccine is developed & rolled out. For low-herd immunity the timeline is around two years from 1st innoculations (if it provides term immunity).
Plan B = no vaccine or only limited term immunity.
Plan A - travel demand is unlikely to surge with the recessionary background in Australia ==> A380s not required but expensive to maintain on the chance they may be needed. However, no writeoff decision needed until June Qtr 2021 other than cost of ongoing maintenance. Zero value for Q's planes on secondary market (which does not actually exist in reality).
Plan B - travel demand to stay depressed for years even though Australia travels through recession, most likely emerging into prolonged period of profitless growth for the economy. The best example of this is the Japanese economy from 1993 to present day. Residential property prices are around early 1980s levels, the Japanese share market was approaching 40,000 in 1989...
Now, THAT was a bubble.
qz.com
... and they had over 64 million in work and only 3 million unemployed. The conventional wisdom was that the Japanese Govt could afford to spend big to get growth going again combined with zero interest rates as Japan had a huge trade surplus...
Japanese Govt debt is around 240% of GDP.
Govt debt has blown out as the spending has never stopped & the economy has flatlined. If Japanese interest rates were to rise 1% - it would require around 50% of total Govt spending to pay the interest on outstanding Govt debt. Add in the other interest costs tied to the Japanese Govt (unfunded liabilities etc) and it is around 80% of Govt spending that would be required. Zero interest rates are not going away anytime soon. Meanwhile the Japanese population has been falling since 2007. Dropped by over 500,000 in 2019 alone.
A widening gap between births and deaths has put Japan in a demographic squeeze, with fewer people to replace retiring workers and support them as they age.
www.nytimes.com
Two guesses why Australia has been running net immigration at around 250,000/yr for the last 5 years....
Australia has just about the worst 4 year profile BEFORE CV for rate of growth of Govt debt of an OECD country. True we started at low levels but have been adding to it at a world beating rate.
I'd like to be wrong but I fear Q A380s will not even get to do a farewell tour,
www.executivetraveller.com
