1 00:00:00,040 --> 00:00:02,680 Speaker 1: Coming your way in just a moment's time. We are 2 00:00:02,759 --> 00:00:04,880 Speaker 1: due to catch up with Bruce Dale and talk a 3 00:00:04,880 --> 00:00:07,480 Speaker 1: little bit more. He's the aviation expert of course, about 4 00:00:07,520 --> 00:00:11,760 Speaker 1: the ABC state Line reporting that Virgin Australia has claimed 5 00:00:11,800 --> 00:00:14,760 Speaker 1: the fees that the Airport Development Group is charging airlines 6 00:00:14,800 --> 00:00:17,560 Speaker 1: to land at the Darwin Airport were a key factor 7 00:00:17,800 --> 00:00:21,239 Speaker 1: in flight pricing now, Quantus and Virgin declined to take 8 00:00:21,280 --> 00:00:23,520 Speaker 1: part in interviews with the show as I understand it, 9 00:00:23,560 --> 00:00:26,639 Speaker 1: but in statements both suggested that they always try to 10 00:00:26,680 --> 00:00:30,800 Speaker 1: offer great value on prices. Now let's head across and 11 00:00:31,280 --> 00:00:35,159 Speaker 1: catch up with aviation expert Bruce Dale, who joins us 12 00:00:35,280 --> 00:00:38,360 Speaker 1: on the line. Good morning, Bruce, Good morning to you. 13 00:00:38,479 --> 00:00:41,240 Speaker 1: Yes I can, sorry about our technical issues that we're 14 00:00:41,280 --> 00:00:44,640 Speaker 1: having this morning, Bruce. We know that the ABC state 15 00:00:44,680 --> 00:00:48,519 Speaker 1: Line reporting that Virgin Australias claimed the fees that the 16 00:00:48,560 --> 00:00:51,360 Speaker 1: Airport Development Group is charging airlines to land at the 17 00:00:51,440 --> 00:00:55,240 Speaker 1: Darwin Airport were a key factor in flight pricing. Now. 18 00:00:55,280 --> 00:00:58,800 Speaker 1: Both Quantas and Virgin Australia reportedly didn't take part in 19 00:00:58,800 --> 00:01:02,480 Speaker 1: interviews with that show. They did provide statements and from 20 00:01:02,600 --> 00:01:06,120 Speaker 1: Virgin they said that Darwin Airport's plans to double passenger 21 00:01:06,200 --> 00:01:09,240 Speaker 1: charges over the next three years will continue to put 22 00:01:09,240 --> 00:01:14,080 Speaker 1: pressure on airfares and will not incentivize airlines to grow 23 00:01:14,280 --> 00:01:18,360 Speaker 1: services to Darwin. Now, I mean, I think for a 24 00:01:18,400 --> 00:01:20,600 Speaker 1: lot of people listening this morning, that's going to be 25 00:01:20,640 --> 00:01:23,880 Speaker 1: disappointing for them to think that there could be any 26 00:01:24,000 --> 00:01:28,360 Speaker 1: factor that could prevent those services from growing. But Bruce, 27 00:01:28,440 --> 00:01:30,520 Speaker 1: what are you sort of First off, I guess what 28 00:01:30,680 --> 00:01:33,720 Speaker 1: factors come into play when we look at flight prices. 29 00:01:34,520 --> 00:01:38,720 Speaker 2: Okay, certainly, I mean any cost input is goes into 30 00:01:38,760 --> 00:01:42,800 Speaker 2: how flight prices are charged. Airport fees is one element 31 00:01:42,880 --> 00:01:46,080 Speaker 2: of them. In the territory, We've also got the factors 32 00:01:46,200 --> 00:01:49,520 Speaker 2: of distance, how far away we are from our key markets. 33 00:01:50,320 --> 00:01:54,400 Speaker 2: And then also how many anti seats are available, sorry, 34 00:01:54,400 --> 00:01:57,080 Speaker 2: how many empty seats there are, because that cost has 35 00:01:57,120 --> 00:01:59,160 Speaker 2: to get passed on to the consumers as well in 36 00:01:59,160 --> 00:02:01,800 Speaker 2: some shape or form. And so when I say empty seats, 37 00:02:01,800 --> 00:02:03,440 Speaker 2: it's over the course of a full year or of 38 00:02:03,440 --> 00:02:06,040 Speaker 2: a full season. They're like any seasonal business. You know, 39 00:02:06,080 --> 00:02:09,799 Speaker 2: a farmer or you know, they sell produce in the 40 00:02:09,840 --> 00:02:13,200 Speaker 2: good times to offset their costs in the low season. 41 00:02:14,320 --> 00:02:16,440 Speaker 1: So Bruce, when you look at then the fact that 42 00:02:16,880 --> 00:02:21,200 Speaker 1: Virgin has reportedly told the ABC state line that you 43 00:02:21,240 --> 00:02:26,400 Speaker 1: know that the fees to land and to obviously do business, 44 00:02:26,520 --> 00:02:28,640 Speaker 1: I guess is probably another way of putting it. With 45 00:02:28,720 --> 00:02:32,160 Speaker 1: the Darwin Airport potentially going to double over the next 46 00:02:32,200 --> 00:02:35,120 Speaker 1: three years, what kind of impact does an increase like 47 00:02:35,240 --> 00:02:37,160 Speaker 1: that have for an airline? 48 00:02:38,480 --> 00:02:42,120 Speaker 2: It does have an impact. So it's like any business 49 00:02:42,120 --> 00:02:45,240 Speaker 2: having a cost us through it has to flow through 50 00:02:45,280 --> 00:02:49,120 Speaker 2: to either higher prices orride. Is that a market that 51 00:02:49,160 --> 00:02:52,000 Speaker 2: you want to serve? Is it actually economically viable for them? 52 00:02:52,440 --> 00:02:55,440 Speaker 2: I mean, it's worth noting that Virgin, with their focus 53 00:02:55,480 --> 00:02:59,480 Speaker 2: on trying to restore their rout profitability, did withdraw from 54 00:02:59,520 --> 00:03:02,920 Speaker 2: Sydney and they haven't returned because they've been unable to 55 00:03:02,919 --> 00:03:07,840 Speaker 2: make money on that route according to their their behavior. 56 00:03:08,240 --> 00:03:10,800 Speaker 2: It's like airlines are like any business. If they see profit, 57 00:03:10,840 --> 00:03:12,400 Speaker 2: they come in and they grow. But if it's an 58 00:03:12,440 --> 00:03:15,440 Speaker 2: unprofitable business, they either maintain it or they cut back. 59 00:03:15,840 --> 00:03:18,639 Speaker 1: So the reality is, I mean, if it's not profitable, 60 00:03:18,760 --> 00:03:21,640 Speaker 1: if it's not profitable or it's not sort of economically viable, 61 00:03:21,680 --> 00:03:24,040 Speaker 1: that we could even see a decrease in the different 62 00:03:24,080 --> 00:03:25,240 Speaker 1: services provide it. 63 00:03:26,440 --> 00:03:28,919 Speaker 2: Yes, and it is something which we have seen over time. 64 00:03:30,840 --> 00:03:33,760 Speaker 2: The territory has always struggled to attract low cost airlines. 65 00:03:34,520 --> 00:03:38,400 Speaker 2: Air Asia only fluid to Bali for fourteen months as 66 00:03:38,400 --> 00:03:40,080 Speaker 2: a good example. Air Asia is one of the lowest 67 00:03:40,120 --> 00:03:42,560 Speaker 2: cost airlines in the world. So just because you have 68 00:03:42,640 --> 00:03:46,200 Speaker 2: low costs doesn't necessarily and low fares doesn't necessarily mean 69 00:03:46,240 --> 00:03:48,120 Speaker 2: you're going to be able to grow the market enough 70 00:03:48,320 --> 00:03:51,440 Speaker 2: to offset the number of empty seats in a small 71 00:03:51,520 --> 00:03:53,800 Speaker 2: place like Darwin. Unfortunately. Yeah. 72 00:03:54,160 --> 00:03:56,120 Speaker 1: Look, and you know, you and I have spoken on 73 00:03:56,160 --> 00:03:59,200 Speaker 1: so many occasions, Bruce about how expensive it is to 74 00:03:59,240 --> 00:04:02,000 Speaker 1: sort of fly out of dialing at different times. I mean, 75 00:04:02,040 --> 00:04:04,760 Speaker 1: you've given our listeners some tips in terms of you know, 76 00:04:04,800 --> 00:04:07,200 Speaker 1: booking early and that kind of thing. But it just 77 00:04:07,240 --> 00:04:10,240 Speaker 1: feels like we're copying it, you know, in a lot 78 00:04:10,240 --> 00:04:13,240 Speaker 1: of different directions with this news this morning. 79 00:04:14,520 --> 00:04:16,920 Speaker 2: Yes. Yes, one thing we have started doing the company 80 00:04:16,960 --> 00:04:20,000 Speaker 2: I'm working at is tracking four air fairs what people 81 00:04:20,000 --> 00:04:23,680 Speaker 2: are paying on average. Most people are paying between three 82 00:04:23,720 --> 00:04:26,680 Speaker 2: and four hundred dollars for a one way fare to 83 00:04:26,880 --> 00:04:30,000 Speaker 2: a southern capital. I know there's a lot of focus 84 00:04:30,000 --> 00:04:33,240 Speaker 2: on these very high last minute fairs which typically come 85 00:04:33,279 --> 00:04:36,280 Speaker 2: on sale within about a week of travel, or at 86 00:04:36,320 --> 00:04:40,159 Speaker 2: times when there's absolute peak demand and their flight sell 87 00:04:40,200 --> 00:04:43,520 Speaker 2: out well in advance. A good example is Christmas. Unfortunately, 88 00:04:45,400 --> 00:04:47,680 Speaker 2: so overall I think what we need to focus on 89 00:04:47,760 --> 00:04:50,359 Speaker 2: is how much is the average fair being paid? Maybe 90 00:04:50,400 --> 00:04:52,800 Speaker 2: ignore the really cheap fares on one end and the 91 00:04:52,839 --> 00:04:55,040 Speaker 2: really expenses on the other fair which are paid by 92 00:04:55,200 --> 00:04:57,760 Speaker 2: very small portion of travelers, and see actually what is 93 00:04:57,800 --> 00:05:00,719 Speaker 2: happening to that average fair movement? Sure that happens. We 94 00:05:00,760 --> 00:05:02,840 Speaker 2: need better quality data from the government to be able 95 00:05:02,920 --> 00:05:05,080 Speaker 2: to do that and inform what is going on in 96 00:05:05,080 --> 00:05:05,480 Speaker 2: the market. 97 00:05:05,800 --> 00:05:08,320 Speaker 1: And then when it comes to you know, the cost 98 00:05:08,320 --> 00:05:12,080 Speaker 1: of flying in and out of well the Darwin Airport 99 00:05:12,240 --> 00:05:15,200 Speaker 1: and those landing fees and the different fees, how do 100 00:05:15,279 --> 00:05:17,880 Speaker 1: we compare to other states. 101 00:05:18,720 --> 00:05:21,640 Speaker 2: I don't have the information to hand, but what I 102 00:05:21,680 --> 00:05:23,880 Speaker 2: can touse just for simple facts which are quoted on 103 00:05:23,880 --> 00:05:27,600 Speaker 2: the Darwin Airport website, because all airports have to list 104 00:05:27,640 --> 00:05:31,040 Speaker 2: their charges, it's part of their conditions of use. And 105 00:05:31,160 --> 00:05:35,520 Speaker 2: for a domestic departure it comes to sixty two dollars 106 00:05:35,560 --> 00:05:40,480 Speaker 2: forty one PUSDST and it's forty five dollars sixty plus 107 00:05:40,560 --> 00:05:43,359 Speaker 2: years tea every time you land the difference in charges 108 00:05:43,360 --> 00:05:46,119 Speaker 2: of that securities, only to charge it on departing passengers. 109 00:05:46,400 --> 00:05:48,680 Speaker 1: So really for every flight, you'd be looking at a 110 00:05:48,680 --> 00:05:55,200 Speaker 1: one hundred bucks. Yes, that does seem quite expensive. Then 111 00:05:55,480 --> 00:05:58,719 Speaker 1: when you look at the whole cost of your air fee. 112 00:06:00,000 --> 00:06:02,000 Speaker 2: And do I mean one hundred bucks is certainly a 113 00:06:02,000 --> 00:06:05,440 Speaker 2: lot if you're a low cost airline. If you're paying, 114 00:06:05,480 --> 00:06:08,200 Speaker 2: say ten thousand dollars to find Singapore Airlines to go 115 00:06:08,360 --> 00:06:11,479 Speaker 2: first class to London, which people do, it's nothing and 116 00:06:11,520 --> 00:06:13,880 Speaker 2: that their lives. The problem is airports can only charge 117 00:06:13,880 --> 00:06:16,400 Speaker 2: one fee per passenger. They can't say, actually we're going 118 00:06:16,440 --> 00:06:18,960 Speaker 2: to give a discount to those on cheaper fairs because 119 00:06:18,960 --> 00:06:21,360 Speaker 2: we can charge more for people who are paying ten 120 00:06:21,400 --> 00:06:23,800 Speaker 2: thousand dollars per return tickets. 121 00:06:24,279 --> 00:06:26,440 Speaker 1: So is there I mean, is there any way that 122 00:06:26,520 --> 00:06:30,200 Speaker 1: these you know that these fees can be minimized or 123 00:06:30,240 --> 00:06:34,040 Speaker 1: what factors sort of go into why you know they 124 00:06:34,120 --> 00:06:36,719 Speaker 1: need to be paid? I suppose is another important question. 125 00:06:37,800 --> 00:06:42,800 Speaker 2: Yes, because airports, like airlines, they're they're high cost operations, 126 00:06:42,920 --> 00:06:46,240 Speaker 2: very capital intensive. I mean the runway overlay was hundreds 127 00:06:46,279 --> 00:06:49,440 Speaker 2: of millions of dollars to get done. And as an example, 128 00:06:50,240 --> 00:06:53,000 Speaker 2: and so why it's probably an issue is that for 129 00:06:53,080 --> 00:06:55,960 Speaker 2: airlines they like to lock in pricing for between five 130 00:06:55,960 --> 00:06:59,120 Speaker 2: and ten years in advance. So if either party gets 131 00:06:59,160 --> 00:07:01,920 Speaker 2: the calculation wrong, it's going to have significant impacts on 132 00:07:02,200 --> 00:07:07,200 Speaker 2: pick the profitability or the viability of the business otherwise. So, 133 00:07:07,279 --> 00:07:09,960 Speaker 2: although I will say sixty two dollars forty one is 134 00:07:09,960 --> 00:07:12,680 Speaker 2: the published if you out there, the recommended retail price, 135 00:07:12,920 --> 00:07:15,440 Speaker 2: that doesn't preclude the airports and airlines coming to an 136 00:07:15,480 --> 00:07:21,200 Speaker 2: agreement of something else confidential of course between them. 137 00:07:21,840 --> 00:07:24,680 Speaker 1: And so is that realistically like is that a fee 138 00:07:24,720 --> 00:07:27,320 Speaker 1: to you know, to land? Is it a fee for 139 00:07:27,400 --> 00:07:30,240 Speaker 1: your security? Is it a fee for all the different 140 00:07:30,280 --> 00:07:33,520 Speaker 1: services in that the airport at that destination provides, Like 141 00:07:33,600 --> 00:07:35,720 Speaker 1: what exactly are the airlines paying for? 142 00:07:36,800 --> 00:07:40,360 Speaker 2: Certainly, so basically what you are a passenger of paying 143 00:07:40,400 --> 00:07:43,360 Speaker 2: to the airport via the airline is the charges for 144 00:07:43,800 --> 00:07:48,760 Speaker 2: using the terminal basically using the runway infrastructure. And then 145 00:07:48,800 --> 00:07:55,560 Speaker 2: there's security and some technology which allows you know where 146 00:07:55,600 --> 00:07:57,720 Speaker 2: the scanner which goes deep at the gate to say 147 00:07:57,840 --> 00:08:00,360 Speaker 2: you've got on board. Those sorts of things about four 148 00:08:00,440 --> 00:08:03,320 Speaker 2: or five different elements which go into the fees and 149 00:08:03,360 --> 00:08:07,160 Speaker 2: the reason they're broken down is because some fees may 150 00:08:07,320 --> 00:08:10,360 Speaker 2: chart find some flight types and other fees in different 151 00:08:10,640 --> 00:08:14,080 Speaker 2: flight types. So it's to get the revenue even across 152 00:08:14,160 --> 00:08:15,320 Speaker 2: how you actually use the airport. 153 00:08:15,680 --> 00:08:18,400 Speaker 1: And Bruce, I mean, would those recent upgrades at the 154 00:08:18,440 --> 00:08:21,000 Speaker 1: airport or the upgrades that are still underway, would that 155 00:08:21,080 --> 00:08:23,080 Speaker 1: have an impact on those fees going up? 156 00:08:25,560 --> 00:08:27,680 Speaker 2: Any time there is an airport upgrade that does have 157 00:08:27,720 --> 00:08:32,320 Speaker 2: an impact on the fees. It's basically what needs to 158 00:08:32,320 --> 00:08:34,520 Speaker 2: come down to is how fees are determined is they 159 00:08:34,520 --> 00:08:38,360 Speaker 2: look at the operating costs, you know, that's like your 160 00:08:38,360 --> 00:08:43,640 Speaker 2: staff costs, your capital investments, and then how many passengers 161 00:08:43,640 --> 00:08:46,880 Speaker 2: are going to be spread across over that. So if 162 00:08:47,400 --> 00:08:48,960 Speaker 2: you do a big upgrade but you don't expect too 163 00:08:49,000 --> 00:08:51,000 Speaker 2: many more passengers, the fee could go up. But if 164 00:08:51,040 --> 00:08:53,319 Speaker 2: you do a big upgrade and you're expecting passenger growth, 165 00:08:53,400 --> 00:08:55,400 Speaker 2: the fees can go down. So those are the sorts 166 00:08:55,400 --> 00:08:58,240 Speaker 2: of discussions they have, and often the discussions are about 167 00:08:58,600 --> 00:09:01,400 Speaker 2: who thinks what in terms of the future outlook for 168 00:09:01,440 --> 00:09:02,480 Speaker 2: a particular airport. 169 00:09:03,360 --> 00:09:06,760 Speaker 1: Well, Bruce Dale Aviation expert, We always love having you 170 00:09:06,800 --> 00:09:08,840 Speaker 1: on the show. Thank you so very much for your 171 00:09:08,840 --> 00:09:09,600 Speaker 1: time this morning. 172 00:09:10,440 --> 00:09:12,160 Speaker 2: My absolute pleasure Katie, thank you. 173 00:09:12,360 --> 00:09:13,280 Speaker 1: We'll talk to you soon.