Forecast passenger numbers

Tourism on Kangaroo Island will continue to grow into the future. Strong historical trend data and the Island’s strategic importance at both a Commonwealth and State Government level imply that this will almost certainly be the case. This growth, in combination with an upgrade of airport facilities and other supporting strategies (marketing, booking arrangements and other promotions - section 9.4 and 9.5), provides enormous potential for not only a reversal in air passenger trends but a return to volumes above the levels seen in 1999 where 90,000 air passenger movements occurred.

An upgrade of Kangaroo Island airport with supporting strategies would unlock tourism potential and more specifically would be more likely to result in a material increase in airline passenger numbers. As mentioned earlier in project need (section 4) an upgrade would:

• support the Commonwealth and State Government strategies of boosting tourism activity on Kangaroo Island;

• allow direct access from interstate airports – Melbourne, Sydney and Perth;

• assist Kangaroo Island convert ‘consideration to visitation’²³ through ease of access;

• support demand from private passenger jets with higher tyre pressure for ‘high-value tourism’;

• increase the amenities for air travel passengers;

• ‘Future proof’ the airport such that it can accommodate changes to aircraft type in the future and provide security screening for passengers on larger aircraft; and

• provide the ability to accommodate refuelling if future (longer) routes require this.

5.2.1 Pacific Aviation Consulting

Pacific Aviation Consulting (PAC)²⁴ recently conducted an assessment of likely future air passenger demand at Kangaroo Island Airport, see Appendix A. PAC’s modelling has assumed that Kangaroo Island can continue its strong performance in visitor growth, and turn around the decline in air passenger demand.

To forecast total air visitor movements over the next 20 years, PAC first considered total visitor movements (by all modes of access) and then considered what proportion of total visitor movements would likely travel by air (share of total visitor movements).

Total visitor to Kangaroo Island

PAC has assumed visitor growth under a variety of scenarios, using a

‘low‐medium‐high’ scenario set:

• Low-growth scenario: PAC considered low-growth to be between 1.1-1.3% per year between 2012 and 2030. This was based on Tourism Forecasting Committee forecast growth and the origins of Kangaroo Island’s visitor mix, provided by SATC.

23 BDA Marketing Planning found that interstate consideration for Kangaroo Island was high (15%) when compared to other Australian regional areas.

24 Pacific Aviation Consulting Pty Ltd is a specialist management consultancy with a focus on the aviation industry.

33

• Medium-growth scenario: PAC has assumed a continuation of the visitor demand it observed between 2001 and 2011 - a compound annual growth rate of 2.9%

between 2012-2030. This scenario sees visitor demand to Kangaroo Island increase to 250,000 visitors by 2021, and to 300,000 visitors by 2027. This scenario was used in further modelling.

• High‐growth scenario: Australian domestic passenger growth for the past 10 years has shown a compound annual growth rate of 5.2%. A high-growth scenario would see growth rising from the current 2.9% p.a. to 5.2% p.a. by 2020, and returning to 2.9% by 2030.

Figure 15: Forecast visitors to Kangaroo Island, 2001 - 2030

Source: PAC

Total visitor movements by air

PAC has assumed air passenger growth under a variety of scenarios, using a

‘low‐medium‐high’ scenario set:

• Low–growth scenario: maintain air travel’s current proportion of total visitor movements – 12%.

• Medium-growth scenario: a recovery in air travel demand from 12% to 30% of total visitor movements by 2030.

• High-growth scenario: a rise in air travel demand to 50% of total visitor movements by 2030; a proportion observed at King Island, Lord Howe Island and Norfolk Island.

Figure 16 below shows the three air travel demand scenarios under the medium growth scenario for total visitors to Kangaroo Island (Figure 15).

34 Figure 16: Passengers at Kangaroo Island airport (medium visitor growth scenario), 2001 - 2030

Source: PAC

Conclusions of PAC modelling

PAC consider a scenario of medium growth in total visitor numbers (2.9% compound annual growth between 2012-2030) and medium growth in total proportion of visitors travelling by air (12% to 30% of total visitor movements by 2030) to form the basis of assessments of likely demand for future air services. This is represented by the

‘medium’ forecast in Figure 16.

From this ‘medium’ forecast, PAC has assessed the likely demand for air services based on aircraft currently and likely to be in operation, both under monopoly operator as well as competitive entry scenarios. It found that there will be likely demand for a 70-seater operator (i.e. ATR 72) by 2018-2019, either as a competitor to existing services to Adelaide or with a new service to Melbourne²⁵. The following figure depicts the potential air travel demand from Melbourne.

Figure 17: Forecast demand from Melbourne, 2012-2030

0 50 100 150 200 250

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029

Melbourne Medium Thousands of air passengers

PAC suggest that based on the modelling and other background information, Kangaroo Island faces a critical infrastructure ‘crunch’ in the next five to ten years. PAC notes that the incumbent operator is likely to consider airframe replacement for Saab 340

25 It is possible that new services to Sydney / Perth would also be possible, however the Melbourne service has been considered in the following analysis as more likely due to existing Q400 aircraft coming from Melbourne to Adelaide and Port Lincoln.

35 aircraft in the modelled 20 year horizon. It is not known what aircraft are likely to be considered as replacement airframes, however there are no aircraft in the 30‐50 seat size range currently being manufactured – therefore, it is likely that the operator will need to consider larger aircraft than its existing Saab 340 aircraft.

There is no guarantee that any operator will necessarily allocate aircraft for this opportunity should the demand exist, however the Kangaroo Island airport’s current inability to cater for this aircraft would certainly close the opportunity of either a Melbourne service or competition on the Adelaide route.