ATIA spotlights significant economic impact of domestic flight cancellations

Research commissioned by the Australian Travel Industry Association (ATIA) has drawn attention to the significant economic impact of domestic flight cancellations.

This comprehensive study, conducted by former Qantas economist Tony Webber, provides a detailed analysis over two decades, demonstrating a trend where airlines often cancel flights for purely commercial reasons, impacting both the travel industry and consumers.

Key Findings from the Research

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% decrease in travellers due to flight cancellations could lead to an estimated A$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 A$143 million and A$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 Cancellations also lead to seats being withdrawn from the market, which raises airfares for those yet to book a flight.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% of flights in that slot over the year. 

In light of these findings, the ATIA calls 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.

ATIA Chief Executive Dean Long advised “The 80-20 rule is not fit for purpose. A 95-5 rule would be more appropriate to encourage airlines to operate to schedule.

“This research highlights critical issues within our industry. It's not just about the airports; it's about understanding where the chokepoints are and addressing them.

“In the year to October 2023, assuming a 5% passenger drop due to cancellations staggering $405 million would be lost overnight tourism expenditure. This number blows out to over $1.6 billion if 20% of passengers choose not to fly. The ripple effect of this is immense, severely damaging the overall tourism industry.

“In light of these findings, the ATIA calls 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 Australian Travel Industry Association (ATIA) is the peak body representing Australia’s $69 billion travel industry. ATIA represents the majority of Australian travel agents, corporate agents, tour operators, wholesalers and ITOs. 92% of ATIA members are small businesses, with women making up 72% of the workforce.

ATIA administers the Australian Travel Accreditation Scheme (ATAS), which is the largest and most representative accreditation scheme for travel businesses in Australia. ATIA represents over 1,100 ATAS members and over 28,000 employees nationwide, directly supporting 3.5 million Australian travellers every year.

The report is available here.