ATIA: Airlines deliberately cancel flights for profit, hindering consumers & travel industry

Adelaide, Australia - March 21, 2016: Planes from domestic air industry competitors and rivals Qantas and Virgin, coming and going from Adelaide airport.
Edited by Travel Weekly

    The Australian Travel Industry Association (ATIA) has commissioned a research paper that shows the significant economic impact of domestic flight cancellations on both the broader industry and consumers.

    The 68-page study, conducted by former Qantas economist Tony Webber, shows a detailed analysis of how airlines over the past two decades have cancelled flights for purely commercial reasons, to the disadvantage of the broader travel industry and consumers.

    Speaking on the report, ATIA CEO Dean Long said this research was paramount for highlighting the critical issues within our industry.

    “It’s not just about the airports; it’s about understanding where the chokepoints are and addressing them,” Long said.

    From the report, the five key findings are:

    1. Flight cancellations for commercial gain: Airlines have been found to cancel flights not just for operational or weather-related reasons, but also to drive profits.
    2. Impact on travel intermediaries: The primary cost for travel intermediaries is the time spent by staff in reorganising trips, which includes rebooking flights, accommodations, and other services. This results in lost opportunities and revenue.
    3. Effect on tourism expenditure: A 5 per cent decrease in travellers due to flight cancellations could lead to an estimated $405 million loss in domestic tourism from Australia’s top ten airports annually. Sydney Airport’s cancellations alone could reduce domestic tourism expenditure by between $143 million and $572 million per year.
    4. Airports’ Revenue Losses: The top ten Australian airports face an estimated annual loss of A$4.8 million in aeronautical revenue and A$1.5 million in non-aeronautical revenue per year, assuming a 5% passenger drop due to cancellations.
    5. Passenger Inconveniences and Costs: Passengers bear out-of-pocket costs and lose valuable time due to cancellations. The opportunity cost for delayed passengers can be significant, particularly for business travellers. Cancellations also lead to seats being withdrawn from the market, which raises airfares for those yet to book a flight.

    Airlines are able to maintain the practice of cancellations without losing valuable airport access due to the 80-20 rule. Under the rule, airlines can keep a specific timeslot as long as they don’t cancel more than 20 per cent of flights in that slot over the year.

    “The 80-20 rule is not fit for purpose. A 95-5 rule would be more appropriate to encourage airlines to operate to schedule,” Long said.

    In light of these findings, the ATIA has called for immediate action and reforms in the aviation sector to address these issues, ensuring the sustainability and growth of Australia’s travel and tourism industry.

    The findings come as the Australian Competition and Consumer Commission (ACCC) currently investigates Qantas for allegedly selling tickets on flights that it had already cancelled. ACCC chair Gina Cass-Gotlieb said the commission is seeking $250 million in damages – the largest amount ever sought.

    The National Carrier has made the argument that travellers purchase a ‘bundle of rights’ when booking with the carrier.

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