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The cost of travel could be at the heart of the next economic crisis

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·Contributing Editor
·4-min read
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(Photographer: Brendon Thorne/Bloomberg)
(Photographer: Brendon Thorne/Bloomberg)

The Qantas Airways boss is warning of another economic crisis if state borders don't open again soon.

Last week it was revealed the coronavirus is crippling the airline, ripping $2 billion dollars off its bottom line, and that's only a few months of dealing with the impact of COVID-19.

The pain is being felt by everyone.

Roughly 4,000 Qantas workers will be shown the door by the end of next month, while thousands of travellers who desperately want to see friends and relatives living abroad have a long wait to reach them.

For the lucky few who do, it’ll cost and arm and a leg – both in terms of hip-pocket expenses, and lost time in travel.

Let’s take a closer look at the ‘cost’ of travel and lost travel in 2020 and beyond.

National economic pain

Coronavirus took out Qantas' international business and cut local travel by 80 per cent.

To put it bluntly, Qantas Airways is haemorrhaging cash, and there really is only one way to stop the bleeding.

CEO Alan Joyce says interstate borders need to re-open, especially between New South Wales and Queensland.

He argues the decision to keep the borders closed isn’t based on medical or scientific evidence but is motivated by other factors.

In any case, given how vital Queensland tourism is for Qantas Airways, Mr Joyce warns many more jobs will be lost (both at Qantas and elsewhere in the economy) the longer borders stay closed.

My Joyce is actually warning of another “economic cliff”. Whether that’s well founded or not, who knows, but it speaks to the broader issue of how long the economy can survive standing on one leg – as it were.

He wants what he calls a "national framework" in place to get Australia's domestic tourism moving again.

International travel pain

If you’re one of the thousands of Australians itching to travel overseas, Qantas says you’ll need to wait for a vaccine.

It’ll be a staggered start, Mr Joyce says, but Qantas will consider “bubbles”, as he calls it, with countries like New Zealand, and eventually the United States.

However, even with a vaccine, Mr Joyce says travellers will need to wait many months before travelling to the United States.

Of course jet-setters can still attempt overseas trips using other airlines.

Air New Zealand, Emirates, Malaysia Airlines, United and Singapore Airlines all have flights out of major Australian ports.

But not, at this stage, Virgin Australia.

Bond holders are still wrangling with private equity firm Bain Capital as to what to do with the airline.

RMIT management expert Warren Staples believes the carrier will only have very limited capacity once international border re-open.

The bottom line: coronavirus has crippled many companies and airlines have been among the hardest hit. The result post-COVID-19 will, I fear, be limited travel options, higher ticket prices and great inconvenience.

That too will have spill-over affects into the broader economy.

Hip pocket pain

While coronavirus remains and on-going threat, there are additional costs the traveller must wear.

The most obvious expense is hotel quarantine. If an exemption to travel is issued to an individual by Australian Border Force, the returning traveller needs to quarantine.

The New South Wales Government, for example, states that travellers will be charged $3,000 for one adult. Children under 3: no additional cost.

There’s also the cost of being stuck overseas. Despite 4,000 travellers returning to Australians shores per week, that’s right, per week, tens of thousands of Australians can’t find a flight home.

Without employment, this is a great way to burn through cash. I know, I spent several weeks in London before commencing as a producer with Channel 4 news. It came at a huge financial cost.

The cost of COVID

The true cost of coronavirus is only just starting to emerge.

Yes, there’s a big hit to GDP, but it’s often hard to conceptualise what this means or looks like.

Through the travel and tourism industry we can see quite clearly it means job losses, broken dreams, extraordinary inconvenience and disruption, and endless extra expenses.

Alan Joyce has the Qantas Airways company to protect, but his fears for the economy raise an interesting question: what are the longer-term effects of restricting movement when there’s no clear forward guidance for businesses from policy makers.

Businesses, and financial markets for that matter, hate uncertainty. So long as they can plan for what’s ahead, I suspect many of their anxieties may go away.

There are costs to COVID-19, but with good policy, they don’t always need to be overwhelming. The fear though is that they will be.

@DaveTaylorNews

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The All Markets Summit returns on Thursday 17 September 2020.
The All Markets Summit returns on Thursday 17 September 2020.
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