Avalon Airport CEO Update

Transcript

Justin Giddings:We first started speaking to AirAsia X back in 2007, and so it's been a long haul. However, it's gone and come and go a little bit, but we really approached them again at a CAPA function actually last year, around about August or September in Sydney, and we met with Ben Ismail, the CEO, and Bev, And we had a good chat to them, and yeah, so it's been a really quick ride in the last few months for sure. I think that they were finding the pressure at Tullamarine pretty hard in terms of space and availability. There's one example where they actually fly in and have a 3-hour layover because they can't get check-in desks, for example. So operationally it works, of course cost-wise it works as well for them, but I found it was my challenge to make sure that we can actually— they would trust us that we were actually able to deliver this, and that's what we're able to do. We're now in, you know, in planning stages of constructing a terminal. This is a small terminal and it's going to be done very quickly, in fact by the end of the year, but it's going to be good and it's going to provide a really efficient service for their passengers. The other thing I like about it is it almost signals a reinvestment by AirAsia into Australia. So, you know, they've had ups and downs a little bit, but I was able to convince them that coming into Avalon will give them a really high brand profile, which is something that I think they needed at this time. So we've had lots of different terminal designs depending on which airline we've been speaking to. This is one that we had designed for another airline, and it's one that we can do quickly. We can— we don't interfere with the current operations, which would have been difficult, would have slowed us down. So it was AirAsia that came to us last week and said to us, you know, suggested some changes which we've incorporated. So I'd like to think it's a partnership and a genuine partnership. I mean, they're taking a risk by doing what they're doing, but so are we. And so we both need this to work, and I'm really happy with the product. It's going to be a really easy-flow terminal. It's going to be small, but I think people will like that. What my suggestion would be is that we are a very strong leisure and visiting friends and relatives airport. You know, that's— we're right on the doorstep of the Great Ocean Road, but also a lot of the passengers from our region want to go to Bali and places like that. So I could see, you know, I'd be sort of asking them in the future, to consider places like Bali, maybe into Thailand as well. I think they'd be really good destinations for us, but also feeding off from China, you know, and that's the big thing I like about AirAsia is it's not just about KL, but it's the 130 behind destinations that it can actually pull through and bring into Avalon, down to the Great Ocean Road, for example. Well, right now, if we go by what Jetstar's doing, the majority of people do go to Melbourne, so we are Melbourne Avalon Airport. It is about Melbourne for sure. I mean, Melbourne's got 4.5 million people, Geelong's got 200,000, so it's always going to be that Melbourne market. But what's the advantage and what we're seeing, the growth in the Chinese visitation, is all the Chinese who can come down to Avalon without a, without a stoplight, get down to the Great Ocean Road without having to drive through the Melbourne peak traffic. So I think that's really important. So it's a bit of combination of both, and, and that's where we have to be really careful with how we brand this, because the Great Ocean Road, 5.1 million visitors a year. Wow. Is a huge carrot for them. But I also understand that a lot of people do want to have that Melbourne experience. So it'll be branded as Melbourne Avalon, but certainly we'll have people on the ground encouraging people to go down the Gracie Road, go to Geelong, go to regional Victoria and look around. I think it'll be the same mix, especially the inbound. I mean, inbound, I don't think people really mind where they fly to. I don't see there'll be a big change there at all. And it's predominantly an inbound market. So inbound, people want to go to Melbourne. they'll see Melbourne Avalon. As long as we've got the connections right, which we have, we've got SkyBus operating now who are taking people directly from Avalon into the Melbourne CBD, exactly the same service as was operated at Tullamarine. I don't think there'll be any difference on inbound. Where I've got to really concentrate is convincing people from Melbourne to drive down to Avalon to utilise that service without deteriorating the yield for the airline. And that's what my big challenge is. And that's why we really have invested a lot in a marketing program to encourage people from Melbourne to use the service. So they've ordered double-deckers on the back of this, so, and I think they're coming in about April or May this year. So it's already happening. The SkyBus have been tremendous. They're putting a depot out there. The numbers have just gone up. Our load factors on airlines have just gone up incredibly ever since we introduced SkyBus. It's probably been the biggest single change for growth at Avalon since my time, and I've been there 9 years. So SkyBus is a really good brand. It's a strong brand. It interconnects with 50 hotels in the Melbourne CBD. Wow. We've actually now introduced a SkyBus service down to Geelong and to the Great Ocean Road as well, so it's a really important part of this story. So one of the issues I'm finding in Australia is that the airlines domestically aren't growing that much, so the orders aren't coming through, so they're all probably trying to ramp up their yields a little bit. So our flight numbers haven't increased for a couple of years, but our load factors have grown up so much in that our numbers were up 10% last year just on load factors alone. So last year, I think we just had over 800,000 passengers through the airport. But our load factor is just— if I've showed you the figures, you go, wow, you really need more flights. So we're crying out for more flights. I'd love to see Tiger come back. I really would. I think that Tiger in Melbourne is just sort of going okay, not really growing. And I think that if they could pull that down to Avalon, it would give them a little bit more profile and give It would mean that more international airlines are likely to follow them as well, which would be good for us. And it also gets them away from cannibalizing their Virgin market, which is also probably under some pressure. Yeah, that was a Jetstar decision. I think just ultimately it was about maximizing yield. So our Sydney flights are going so well. Hobart does really, really well in the peak season, but in the off-peak, you know, the load factors were down a bit. So, you know, I would like to keep Hobart for sure, but I can understand that growing your passenger numbers without growing more flights, they had to make that decision. So I'd like to see Hobart come back again, but it was only 3 times a week and it's sort of hard to make that work. You need at least a daily, I think, to really, you know, give people choice of being able to fly. Yeah, well, Canberra is a big one. So the growth, you know, more specifically about Geelong and the service industries, we've got, you know, NDIA, TAC, WorkSafe, all these businesses' head offices are now in Geelong and they're crying out for a Canberra service. In fact, just before I was reading an email, which is a briefing from an airline, smaller airline, who are looking to maybe run that service from Avalon to Canberra. It'd only be a few times a week, but it'd be, you know, worked out so it picks up that business market and maybe that tourism market back o'clock or back of the other way. So I'd love to see Canberra. I'd love to get Brisbane back. We're doing Gold Coast. The numbers are amazing. And Brisbane is just crazy. But they're slot constrained. That's the other issue. You know, airports again, Perth would be really, really good. With the decline of the mining boom though, it's probably not as important as what it was a few years ago. But yeah, we are doing 800,000 passengers. We probably should be a 1.4, 1.5 million passenger domestic airport. Well, it's about 60% inbound for Sydney, for example. So, so 60% of the people from Sydney are coming down and they're utilising it because of lower cost or lower price fares. And so Jetstar would probably see that as a problem because they want to try and maximise their price. So that's one of the issues I've got. But certainly, I think honestly, if we put more flights into Sydney, I think we'll fill them. I definitely would like to see the Hobart introduced to a daily service. I think you get a better result. A lot of the complaints we would have is that, oh, we want to come back on this day, but there was no flight. And they just think it's sold out. People think it's sold out because it's not listed, whereas we knew that was only 3 times a week. Look, I think definitely there is, and But we're building this so we can grow it too, because we're building to a very strict timeframe. So we can't build the Taj Mahal in 6 months. So but I really want to get to New Zealand. I just think New Zealand is a, is a key for us with a lot of the Middle Eastern airlines coming down, doing that hop across. It sort of killed yields a bit. But I think that New Zealand is a key one for us. Also, Hawaii would be a good one. Those leisure destinations, as I said before, where people can come down They park in the car park cheaper. They can get a lower priced ticket because the lower cost environment would be really good as well. And of course, the Middle East eventually. The Middle East is important, especially with all the freight operations that we have on the freight produce, because we come from a really high value produce area. I think that would be good as well, but that's longer term. Look, we're talking to the Australian government and I'm very hopeful they put in a full, full operation. It really has to. If they start operating and driving down just from Tullamarine, for example, it adds a lot of cost. And because we're so cost sensitive, we just can't afford that to happen. So I'm hoping for a permanent presence that can be scalable. And that's what we're really talking about. So they haven't actually told us what their presence is going to be. Obviously, they're under a strict timeline, but I'm seeing this AirAsia as a catalyst for growth, a catalyst for new international airlines. This is not just about AirAsia. Very, very important. They're an important and strong partner, and we hope that they grow, but we need to make this work for other international carriers, but also more domestic carriers. Oh, look, it's been great just talking to people. I was talking to some people from other airlines before, and just, you know, because a lot of people probably don't realise we've just become the 2nd international airport for Melbourne, and that's what I'm really hoping to present later on when I speak, is to talk to everyone to say, look, you know, this is a credible alternative. It'll save you millions of dollars a year. That's what we're doing. And so that's probably been the biggest opportunity for me. And it's just wonderful to meet everyone and, and get across to Singapore.

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