Capacity fears as dollar dips (2)
While the inbound tourism industry may be welcoming the recent decline of the dollar, the dip has grave implications for international capacity into Australia, an expert has warned.
Speaking at the Australia Pacific Aviation Summit, CAPA Centre for Aviation executive chairman Peter Harbison revealed many foreign carriers are likely to reduce capacity commitments if the dollar does not strengthen.
"It's very unusual that a currency will lose 15% in value in the space of a few weeks and that's what's happened with the Australian dollar," he said.
Recent increases in international air capacity in the Australian market could be put at risk as foreign carriers linked to the US dollar are hit by the dollar’s weakening.
“They've all gone down by about 15% and that has a dramatic impact on foreign carrier,” Harbison said.
Such a decline equates to $30 million per week in revenue loss for the top 10 foreign airlines, he revealed – a sum of $1.5 billion per annum.
“That is pretty hard to absorb,” he said.
Harbison identified hiking fares in a soft market as problematic prompting carrier’s to consider other courses of action.
In the short term, that could mean the reconsideration of capacity increase plans, while in the medium term they may begin to selectively reduce capacity.
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