The Australian Government will continue to underwrite domestic aviation over the southern 2020/21 summer. Australia’s Deputy Prime Minister announced over the weekend that current subsidy programs due to expire at the end of 2020 will get extended into 2021 to keep airlines flying on essential routes across Australia.
“The Federal Government is doing our bit by underwriting these flights to maintain minimum connectivity,” said the Deputy PM, Michael McCormack, today.
Subsidy programs keeping planes in the air
Throughout much of 2020, the Australian Government has operated two financial subsidy programs to keep passenger planes flying. The first, the Domestic Aviation Network Support (DANS) program, targets the 50 busiest routes in Australia and benefits airlines like Qantas and Virgin Australia. This program now gets extended to January 31, 2021.
The second assistance program zeroes in on smaller airlines operating 270 weekly flights into designated 111 remote and rural towns. This program is called the Regional Airline Network Support (RANS) program and is extended to March 31, 2021. The big beneficiary of RANS has been REX. But airlines such as Alliance, Airnorth, and FlyPelican have also picked up funding to keep flying.
Both programs will cover any losses incurred by airlines operating flights on these designated routes.
To date, the Australian Government has committed around US$920 million to both programs. However, it has only paid out a fraction of this.
“In regional Australia, flights are so central to local economies, underpinning many small businesses including tourism operators, whilst ensuring continued access to key medical supplies and personnel.
“We know regional tourism will help drive Australia’s economic recovery, and today’s announcement of further support for key routes will be a big boost to local economies,” says the Deputy PM.
Mixed response to subsidy program from the airlines
While the programs have provided welcome support for Australia’s airline industry, both Qantas and Virgin Australia have criticized it. The airlines only get subsidies for flights they operate. The CEOs of Qantas and Virgin Australia have said they’ve received very little money from DANS as they’ve flown very few flights. Both airlines are running at less than 20% of their usual domestic capacity. That partly explains why airlines have not received the full $920 million allocated.
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The smaller regional airlines have proved more agile and benefitted far more from their program. REX picked up nearly US$44 million in direct government subsidies this year, an enormous sum for the small airline.
“I want to place on record our gratitude to the (Prime Minister) Morrison (Australian) Government and to the Deputy Prime Minister and Minister for Infrastructure, Transport and Regional Development the Hon Michael McCormack MP,” said Rex Executive Chairman Lim Kim Hai in August after banking the government checks.
Some local borders start to re-open
Meanwhile, the funding extension announcement comes as some previously closed interstate borders crack open. Queensland is now letting in residents of Canberra. In response, Qantas and Virgin Australia have beefed up flights between Canberra and Brisbane and Gold Coast Airports. Alliance Airlines is also starting flights between Canberra and the Sunshine Coast and Cairns.
South Australia has opened its borders to residents of both Canberra and Sydney in the last week. That’s caused a rush for scarce flights on sectors between those cities. Airlines have since laid on extra services. Michael McCormack wants to see a further easing of local border restrictions and more planes in the air. He says;
“We need the States and Territories to do their bit too as we again encourage the continued easing of border restrictions.”
Until that happens, passenger flights in Australia will continue to operate way below normal levels and most routes will require subsidies if the government wishes to see them continue.