Daily Memo: Disruption Uncertainty Is The Travel Bubble’s Achilles Heel

The travel bubble established between Australia and New Zealand may be groundbreaking, but two brief suspensions within the space of two weeks highlight the challenges facing such an approach. 

The instances of major travel disruption at short notice have dented public confidence in the arrangement, making it harder to restore demand in the market.

The bubble, which was launched on April 19, was the Asia-Pacific region’s first two-way quarantine-free international travel corridor to open since the start of the COVID-19 pandemic. It has allowed Air New Zealand and its Australian counterparts to restore many of their flights between the two countries, providing their first solid international passenger revenue streams in more than a year.

While other travel corridors have previously been set up between Asia-Pacific countries, they have been limited in nature or operate in one direction only. The Australia-New Zealand initiative is the region’s first “real McCoy” bubble, according to Subhas Menon, Director-General of the Association of Asia Pacific Airlines (AAPA).

But while there are few restrictions, there is still the risk that new community-spread coronavirus cases in Australia or New Zealand will cause travel across the Tasman Sea to be suspended. This occurred on April 24, when a three-day lockdown in Perth resulted in a temporary halt to flights from that city. And flights from Sydney were suspended for 48 hours on May 6, providing another reminder of the fragility of the bubble.

Air New Zealand saw strong demand in the first week of the trans-Tasman bubble, CEO Greg Foran told Aviation Daily. The airline carried about 20,000 passengers on its Australian routes that week. However, since then demand has been “a little bit less than we expected,” Foran said.

This prompted Air New Zealand to trim Australian capacity in subsequent weeks. Foran estimates the carrier pulled capacity back by about 20-25% on the Auckland-Sydney route versus its planned schedule, with a reduction of 15% on its Australian routes overall. However, he expects capacity to rise by the end of May, and forward bookings for the July peak period are looking strong. 

Overall, Air New Zealand has seen “a good start, a solid start” to the trans-Tasman bubble, Foran added. Air New Zealand is operating about 60% of its pre-pandemic capacity on the trans-Tasman routes, he said. Flights are about two-thirds full on average, and passenger traffic is heavily weighted towards Australians visiting New Zealand.

Most of the customers on Air New Zealand’s Australian flights in the early weeks of the bubble have been traveling to visit friends and family, according to the airline’s research. There is very little business traffic so far, and there are also relatively few families traveling for vacations.

People are still reluctant to book holiday flights between Australia and New Zealand because of the prospect of unexpected border closures, Foran believes. “They are saying to themselves, do I take the risk, or maybe leave it a few more weeks,” he said. To a large degree, the demand rebound will depend on how confident travelers are about borders remaining open, according to Foran.

Another factor affecting early demand is that bookings only opened a few weeks before the two-way bubble was launched. Foran notes that there is usually a booking window of several months to fill such flights.

These reasons illustrate that “we have to be realistic about demand ... it’s still going to take a little while to build” back to pre-COVID levels, Foran said.

Rival Qantas Group has seen similar trends to Air New Zealand. The Australian carrier said it reduced its planned capacity for the initial weeks of the two-way bubble to reflect “demand patterns” and the short booking window. Qantas intends to add more flights from late May to prepare for the New Zealand ski season.

Many other countries are closely watching the progress of the Australia-New Zealand bubble, said AAPA’s Menon. He stresses that more such arrangements are needed in the Asia-Pacific region. “Every travel bubble is a step in the right direction, and the Tasman bubble is particularly [significant] because it has been implemented without any requirements for testing, vaccination or quarantine,” he said.

The global airline industry has been advocating for a multilateral approach to opening borders, but that appears to be “a pipe dream” in the near term, Menon said. So it is likely that international air travel will restart with bilateral deals instead, where “two governments can come together and agree on requirements and regulations for a bubble,” the AAPA head suggested.

However, Foran cautions that the New Zealand-Australia arrangement would be difficult to replicate widely. That’s because there are so few other markets that have controlled COVID-19 to the same degree. Progress on vaccination programs and the introduction of digital travel passports will be the key to reopening more routes on a country-by-country basis, Foran said.